Citibank Accidentally Sends Half Billion to Lenders, Judge Says They Can Keep It

  • Always check your decimals when sending money, people.

Unless you work in finance, banking and economics aren’t probably the most thrilling subjects. They’re important, sure, but most people can’t really get into them unless something goes terribly wrong.

And boy, oh boy, has something gone wrong. In fact, a U.S. judge described this case as “one of the biggest blunders in banking history.”

Citibank, one of the largest financial institutions on the planet, accidentally sent a bit too much money to the lenders of the cosmetics group Renlon, reported CNN. The lenders were supposed to get around $8 million in interest payments – instead, they received almost $900 million.

That’s just short of a billion dollars, in case your math is as terrible as this author’s.

It sure is an embarrassing mistake for an international financial institution to make, but it shouldn’t be that big of a deal, right? All Citibank needed to do was contact the lenders, admit their mistake, and ask for the money back. Right?

Well, not exactly. Some of the lenders did return the money, but others refused.

Some of the institutions are still holding half a billion dollars of the mistakenly sent money. And now a judge is saying that they won’t have to return the funds.

“Boss? Yeah, hi. Listen, I may have made a little oopsie…”

Laws and Rules

In principle, you – whether you’re a huge bank or a private citizen – shouldn’t keep money that’s accidentally sent to you. It’s only reasonable, since it’s not really your money.

Accidental money transfers also happen often enough – it’s scarily easy to add a misplaced zero to the end of an amount. So, by this logic, this should be a straightforward case.

The reality, of course, is not that simple. You see, in New York law there is something called a “discharge for value defense.”

This rule means that if you received money that you were legally entitled to, and had no reason to suspect that there had been a mistake, the money’s yours. You can keep it.

And that is just the case here. Citibank did owe the lenders money, and would you really believe a bank of that scale would make such an amateurish mistake?

What’s more, CNN reported that the amount of money Citibank sent to the lenders was precisely what Citibank owed to the lenders. Sure, the loan wasn’t set to mature for a good long while, but all the numbers matched.

The lenders probably just thought the bank wanted to get rid of its debts in advance.

‘Borderline Irrational’

At least, that’s the view that courts took. Citibank sued the lenders in August 2020 to get its money back, but the judge presiding over the case ended siding with the lenders.

According to the court, the lenders had no reason to suspect there had been a mistake. A delay in Citibank’s response was taken as further justification – the bank didn’t realize its error until almost 24 hours after sending the money.

In fact, Judge Jesse Furman thought that the lenders would’ve been out of their minds to suspect a mistake.

“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 $1 billion – would have been borderline irrational,” the court’s decision read.

In short, since the money the lenders received was used to pay off a valid debt, the courts say they can keep it. The lenders are naturally more than happy with the decision – Citibank is less so and intends to appeal the decision.

‘Not a Great Career Move’

During the judicial process, Judge Furman used internal chats from HPS – one of the lenders who received money from Citibank – as proof that the lenders didn’t know there had been a mistake, reported CNN.

In the chat logs, dated after Citibank announced there had been an error, two employees joke about the situation:

DFREY5: I feel really bad for the person that fat fingered a $900 million erroneous payment. Not a great career move…

JRABINOWIT12: Certainly looks like they’ll be looking for new people for their Ops group.

DFREY5: How was work today honey? It was ok, except I accidentally sent $900 million out to people who weren’t supposed to have it.

DFREY5: Downside of work from home. Maybe the dog hit the keyboard.

A Tale of Caution

If you ever do get a mistaken money transfer, though, you shouldn’t count on being able to keep it. Since Citibank intends to appeal, the lenders are still legally barred from actually using the money.

Should you start spending money that’s not yours, things could get even uglier. For example, a Pennsylvania couple received felony theft charges in 2019 after they spent most of the $120,000 that was mistakenly sent to their account.

It’s not like they splurged the money on living lavishly, though. When the bank contacted the couple about their error, they said that they used it to pay off bills and car repairs, and gave some to friends that were low on cash.

That’s more noble than – say – going on a luxury vacation, but they still shouldn’t have done that. What’s worse, the couple admitted that they knew the money didn’t belong to them.

“All I’m going to say is we took some bad legal advice from some people, and it probably wasn’t the best thing in the end,” Robert Williams, one half of the couple, told CNN at the time.

We can only speculate why they thought “oh sure, spend the money that’s not yours” was sound legal advice.