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.
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. 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.
“We are extremely pleased with Judge Furman’s thoughtful, thorough and detailed decision,” said Benjamin Finestone, who represented two lenders, Brigade and HPS Investment Partners.
The court ruled the lenders were justified in believing the payment was intentional. Citibank itself did not realize the magnitude of its mistake until nearly a day later.
The judge’s ruling used internal chats between HPS employees as further proof the creditors had no idea the wiring was a mistake until after Citibank sent notices. In the chat, which was dated a day after the mistaken wiring, HPS employees joked about the error:
JRABINOWIT12: certainly looks like they’ll be looking for new people for their Ops group
DFREY5: How was work today honey? It was ok, except I accidentally sent $900mm out to people who weren’t supposed to have it
DFREY5: Downside of work from home. maybe the dog hit the keyboard
The lenders cannot take the money and run. Since an appeal is a possibility, a temporary restraining order is still in effect.
“We strongly disagree with this decision and intend to appeal. We believe we are entitled to the funds and will continue to pursue a complete recovery of them,” Citigroup said in a statement.