Citigroup sues hedge fund after mistakenly wiring $175m

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Citigroup on Monday requested a federal courtroom to power Brigade Capital to return $175m that the financial institution despatched to the hedge fund by mistake — a portion of the $900m erroneously transferred to collectors of the troubled cosmetics firm Revlon.

The mistaken fee, which Citigroup attributed to an “operational mistake”, occurred final Tuesday. The New York-based financial institution moved to get better the funds inside hours of the transfers, which on common had been greater than 100 instances the worth that every lender was as a consequence of obtain. But it surely has up to now didn’t recoup the complete quantity.

Citigroup was meant to have despatched Brigade solely $1.5m in accrued curiosity on the time period mortgage the hedge fund held, in response to the lawsuit. As an alternative, the financial institution wired $176m of its personal funds to Brigade.

“We rapidly caught our fee error and are taking the suitable actions to get better these funds,” Citigroup mentioned in an announcement.

Revlon’s enterprise has been hit arduous by the coronavirus pandemic and Brigade is one in every of a bunch of collectors, together with Symphony Asset Administration and HPS Funding Companions, that has sued the corporate over its debt restructuring plans. Symphony and HPS additionally acquired mistaken funds.

The time period mortgage held by the group was sealed in 2016 to assist Revlon pay for its acquisition of Elizabeth Arden. Its worth has collapsed over the previous six months, nevertheless, and it traded at 26 cents on the greenback this month in contrast with 77 cents initially of the yr.

The holders accuse the corporate of improperly utilizing mental property as collateral for different debt in 2019 and 2020. In a lawsuit filed final week, they charged that Revlon was “stealing away the 2016 Time period Lenders’ collateral”.

Citigroup’s attorneys on the regulation agency Mayer Brown wrote of their criticism that “Brigade has taken the baseless place that Citibank’s overpayment — greater than 100 instances the quantity of the meant switch — served to repay Revlon’s whole principal stability as effectively”.

They added: “Brigade’s actions aren’t simply unconscionable; they threaten the integrity of the executive company operate and the belief within the world banking system.”

Citigroup has mentioned the scenario with its regulators, in response to an individual accustomed to the matter. Brigade, Symphony and HPS declined to remark.

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