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Citibank Mistakenly Sent $175 Million To A Hedge Fund, And The Latter Hasn’t Returned The Money Back


On Monday, Citibank filed a lawsuit in the Southern District of New York, seeking the return of funds that it said were transferred in an “operational mistake.

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The Business Post

The US banking giant stated in court documents that it meant to send Brigade Capital around $1.point 203 |

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5 million in interest payments on a loan the hedge fund made to a distressed cosmetics company Revlon.point 89 | Instead, it wired around 100 times that amount of its own funds to the hedge fund.point 156 | Other Revlon creditors also received incorrect payments adding up to $900 million.point 227 |

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Citibank, which acts as an administrative agent on the Revlon loan, claims in court documents that Brigade Capital is refusing to return the money.point 235 |

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“Brigade has taken the baseless position that Citibank’s overpayment … served to pay off Revlon’s entire principal balance as well,” the bank wrote in its complaint.point 170 | point 170 | 1

To support that claim, the bank includes a message reportedly sent by Brigade Capital that says it’s “not at all clear that the funds were sent as a result of ‘clerical mistake.’ “

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The WSJ Source

On Tuesday, the court placed a preliminary injunction against Brigade Capital ordering it to either return the money back or to not withdraw or dispose of it until a court appearance on August 31st.

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Citibank said Brigade Capital’s actions are “unconscionable” and asked the court to force the return of the money. “Any other outcome would threaten the stability of the banking system [and] reward bad actors that try to capitalize on operational mistakes,” the bank said in its complaint.

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Shutterstock / TY Lim

Citibank also added that Brigade Capital had no reason to expect a large payment from Revlon.

“Virtually no company, let alone a distressed retail and consumer company such as Revlon, would ever make such a substantial prepayment while dealing with the significant financial consequences caused by the ongoing pandemic,” the complaint reads.

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“We quickly caught our payment error and are taking the appropriate actions to recover those funds,” a spokesperson told CNN.

The Washington Post

Last 2016, Revlon acquired Elizabeth Arden, another American cosmetics brand, in a deal financed by a $1.8 billion loan of which Brigade Capital holds a piece. Under the credit agreement, Citibank collects payments from Revlon to give to the lenders.

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Makeup brands have taken a hit during the pandemic because people are spending more time at home. Revlon shares are trading at $7.71 a share, down from recent high above $27 posted in October 2019.