On Friday, Citigroup (C) made headlines with an exceptionally costly clerical error – $900 million was mistakenly wired on behalf of Revlon Inc. to lenders. It’s being said that this enormous gaffe is one of the largest Wall Street errors in a long time.
Citigroup quickly chalked-up the expensive move to being nothing more than a clerical error. But now, the bank may be in an even trickier situation, as some of the lenders are refusing to give the money back. Late Friday, it was found that several of the hedge fund groups who finance Revlon are claiming the cosmetics company was in default, and therefore they are owed the money.
Currently, there’s a large loan that Revlon (REV) has out with investors that’s been the center of a heated debate. While the loan repayment isn’t due until 2023, some of its lenders are suing for earlier payment. The lenders involved in litigation are claiming that Revlon moved some of the intellectual property rights associated with the loan into a position to be used for a different debt. The lawsuit is seeking to move back collateral by use of court order and has also listed Citigroup as a defendant. Because of Citigroup being listed as a defendant in the litigation, it’s thought that some lenders feel it’s ok to retain the wired money.
Some repayments of the mistakenly sent funds have been sent back to Citigroup; however, there is still more yet to be prepaid. The bank has also begun an internal investigation into the error.
At the time of this article’s writing, Citigroup stock was down 2.08% to $51.83 per share. Revlon Inc. stocks are down 9.69% to $7.55 per share.
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