Citi made a $500 million mistake. Here’s how that would play out for regular people
But there is an exception that is applied in the case of Citigroup under a New York law. This law was brought to the fore in a 1991 case where the New York Court of Appeals ruled that a creditor could retain funds if a third party mistakenly sent money to a creditor.
That exception, called the discharge-for-value rule, allows the recipient to keep accidentally trapped money if the money that was accidentally transferred was unpublished, relieved of a valid debt, and the recipient was not aware that Payment was made by mistake.
“District-for-value defense ultimately depends on whether the defendants (or, more accurately, their clients) were on constructive notice of Citibank’s fault at the time they received the wire transfer on August 11,” the verdict. To. “Based on credible testimony and documentary records of defendants’ employees, the court concludes that they were not.”
Revlon lenders said they believed the transfers from Citibank were prepayment for an outstanding loan – due to not being paid until 2023. “The judge matched the amount of principal and interest owed on the loan,” the judge said. .
Therefore, the court ruled that it was reasonable for Revlon lenders to assume that the payment was not made in error.
“Citibank is one of the most sophisticated financial institutions in the world. Thus, defendants and their clients may assume – and, indeed, assume – that the bank had effective internal controls to avoid significant mistakes,” the decision. It is written in
Citigroup said it intended to appeal the decision.