Financial services trade groups are on Citigroup‘s side in the case of the $900 million the bank accidentally sent to creditors last August, Bloomberg reported Wednesday (Nov. 25).
So far, Citi has managed to get back around $390 million from the creditors. But the trade groups say Citi needs the other $500 million back, too.
The case involved creditors for Revlon, some of whom who were expecting a periodic interest payment and others were involved in disputes with the cosmetics company.
But then came the $900 million, which Citigroup says was the result of an employee error and not meant to happen, while some creditors have argued that it obviously must have been intentional and didn’t want to return the money.
They argue that the money should count as “discharge for value” under an old rule saying creditors can, under certain circumstances, keep money sent in error. The creditors have also asked Judge Jesse Furman if they could introduce an expert, who they did not identify at the time, but who they said had decades of experience, who they claimed could prove whether or not the creditors should have known the payment was a mistake. The law says creditors can keep a payment made in error if they didn’t know it was a mistake, PYMNTS reported.
On Wednesday (Nov. 25), the groups filed a motion to ask Furman to force the firms managing the creditors’ funds to return them, Bloomberg reported.
Allowing them to keep the money, the groups said, could create risk for banks facilitating wire transfers. It could “undermine the critical role banks play in providing this essential, low-cost payment system to participants in the financial markets,” and make some firms less willing to perform wire transfers, along with increased costs as well.