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A federal appeals court has overturned a decision to let creditors keep more than half a billion dollars that banking giant Citi sent to them by mistake.
The screw-up happened after the bank mistakenly wired $893 million to Revlon’s lenders, appearing to pay off a loan not due until 2023.
However, a panel of judges has now moved to overturn that decision, rejecting the original judge’s decision that the fat-finger transfers were “final and complete transactions, not subject to revocation”.
Citi was midway through a project to replace obsolete software dating from the 1990s when a ‘clerical error’ resulted in the transfer of the full debt repayment, rather than the interest that was due on the loans.
While some lenders returned the money they were sent, at least ten asset managers refused to comply, leading Citi to take court action in an attempt to recover its losses.
In a statement, Citi says: “Today’s ruling reaffirms our long-held belief that these mistakenly transferred funds should be returned as a matter of law, as well as ethics.
“While Citi has taken steps to reduce the likelihood of such an error in the future, today’s decision provides welcome stability and upholds the concept of cooperation needed for a well-functioning syndicated lending market.”
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