The recipients of roughly $500m (£360m) that US banking giant Citigroup wired erroneously will get to keep the money, a US judge has ruled.
Judge Jesse Furman said Citi was not entitled to recoup its funds, even though they were “indisputably transferred by mistake”.
The bank was supposed to have sent interest payments on behalf of its client, Revlon, but instead fully repaid the cosmetic company’s loans.
Citi said it would appeal the decision.
“We believe we are entitled to the funds and will continue to pursue a complete recovery of them,” a spokeswoman said.
Citi, which was acting as an administrator for Revlon’s 2016 loans, was supposed to send $7.8m in interest payments on behalf of the firm. Instead, last August, it wired nearly $900m to the firm’s lenders – paying off its debts.
After recognising the mistake, Citi managed to recoup some of the money, but 10 firms, including Brigade Capital Management and Allstate Investment, refused to return it, prompting Citi to sue.
Judge Furman in Manhattan said he was bound by New York law, which has previously found that funds received to recoup a debt do not need to be returned, if “they discharge a valid debt, the recipient made no misrepresentations to induce the payment, and the recipient did not have notice of the mistake”.
“The non-returning lenders believed, and were justified in believing, that the payments were intentional,” Judge Furman wrote.
“To believe otherwise – to believe that Citibank, one of the most sophisticated financial institutions in the world, had made a mistake that had never happened before, to the tune of nearly $1bn – would have been borderline irrational.”
Citi was fined $400m by US authorities last year for lapses in internal controls and risk management.