NEW YORK—After committing one of the “biggest blunders in banking history,” Citibank won’t be allowed to recover the almost half a billion dollars it accidentally wired to Revlon’s lenders, a U.S. District Court judge ruled.
Citibank, which was acting as Revlon’s loan agent, meant to send about $8 million in interest payments to the cosmetic company’s lenders. Instead, Citibank accidentally wired $900 million to Revlon’s lenders. Some lenders did return the money, but others did not. Citibank filed a lawsuit in August seeking the return of its funds, but it still has not received $500 million from 10 investment advisory firms after the accidental transfer, CNN reported.
“The law usually punishes those who spend money accidentally deposited in their accounts. Accidental transfers are common in the digital age, and wires can be paid back instantly. A Pennsylvania couple faced felony charges after spending money accidentally deposited in their account,” CNN noted.
But New York law has exceptions to this rule, known as the "discharge-for-value-defense."
If the beneficiary is entitled to the money and did not know it was accidentally wired, they can keep it. Revlon lenders said they believed Citibank was wiring prepayments for a loan, CNN explained.
“After all, the money accidentally wired was the exact amount ‘to the penny’ Citibank owed them, although the loan wasn't set to mature for quite some time,” CNN said.