Citibank is suing hedge fund Brigade Capitals over a payment sent 100 times larger accidentally.
A huge American bank tried to get back the money it accidentally sent to a hedge fund. The overpayment was said to be due to ‘clerical error,’ but the hedge fund does not believe.
A ‘Clerical Error’
Citibank on Monday filed a lawsuit against Brigade Capital Management. They filed their legal documents in New York’s Southern District. The banking company wants to recover the $176 million that they sent in error to the hedge fund last week.
Citibank has a big problem https://t.co/nXyjpus9CV
— CNN (@CNN) August 18, 2020
The actual amount that they intend to send was only $1.5 million. It was meant as an interest for a loan by beleaguered personal care firm Revlon. The banking firm said the overpayment was due to an “operational mistake.”
According to the court documents filed by financial corporation Citigroup, owner of Citibank, “When Citibank discovered the mistake, it promptly asked the recipients to return its money.”
Refusal to Return the Payment
There are other creditors who have received the mistaken remittance which would amount to $900 million. In a BBC news report, it was mentioned that some of those creditors have returned the overpayment. Others did not.
Brigade Capitals was among those who kept the money. They refused to return the overpayment, saying that it is exactly the amount that is owed to them. According to their legal body per Wall Street Journal, they are not buying that “a sophisticated institution like Citibank could have transferred nearly $1 billion, in the exact amount outstanding under the 2016 credit agreement, in error.”
Also in the complaint, the banking giant wrote that no struggling company, like Revlon with its financial troubles amid the pandemic, “would ever make such a substantial prepayment.”
This mishap coincided with Revlon’s battle with its creditors, including Brigade Capitals, according to Yahoo! News. Several investors have also previously sued the cosmetics company over allegations of “stealing” collaterals for the loans. It includes assets owned by Revlon, which covers their brands, that could be seized should there be any inadequate repayment. Revlon is also in the middle of debt restructuring, which is what is gaining resistance from other investors.
Brigade Capital has yet to comment on the issue.