Citigroup cannot recover $644 million it paid out by mistake, US judge rules

Citigroup is on the hook for almost $US900 million ($1.1 billion) in mistaken payments it sent out, according to a US judgment on Monday (local time) that called the debacle “one of the biggest blunders in banking history”

The case is focused on payments totalling some $US500 million ($644 million) that Citigroup sent in August last year to 10 financial companies that were parties to a term loan to cosmetic company Revlon.

Citi, the loan’s administrative agent, mistakenly paid back the $US900 million principal to the members of the lending consortium, rather than interest payments totalling $US7.8 million ($10 million).

Citi quickly realised the error but was rebuffed the following day by the lenders, which included Allstate Investment and Greywolf Loan Management.

The companies thought Revlon was repaying the loan early, said US District Judge Jesse Furman.

Because the defendants in the case believed “in good faith and with ample justification” that the payments were for the full Revlon loan, “the defendants’ clients are entitled to keep the money,” Judge Furman said in a 105-page ruling.