Citi loses legal battle to recover mistaken payments

The recipients of about $500m that US banking giant Citigroup wired erroneously will get to keep the money. So ruled US judge Jesse Furman.

Judge Jesse Furman said that Citi was not entitled to recover 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 has said that 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 for the bank 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. Last August however, it wired nearly $900m to the firm's lenders - paying off its debts.

Citi recognized its the mistake, and managed to recover some of the money. However 10 firms, including Brigade Capital Management and Allstate Investment, refused to return the funds, prompting Citi to sue.

Judge Furman said he was bound by New York law, which has previously found that funds received to repay 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."

3 Ways the Internet of Things Will Change Bank of America and Citigroup

From The Motley Fool –

“The future looks pretty amazing for bank customers and shareholders.

Wouldn't it be nice if there was an easier way to do business with your bank? Easier than online banking and mobile apps? More convenient that heading into the branch? A smarter, faster, and more efficient process to get a loan, make a deposit, and manage your money?

Likewise, wouldn't it be amazing if your favorite bank stock could post dramatically higher margins and better efficiency, and take on less risk?”

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So Tom Hayes Is Guilty. Who Else Is?

From Moyers & Company – 

“When people make that kind of money for the bank — in markets that are supposed to be highly competitive — executives don’t want to know too much about what they’re doing.

'Either Tom Hayes’s bosses at UBS and Citi knew what he was doing, in which case they are guilty as well. Or they didn’t know about a widespread conspiracy being conducted across the electronic communications systems of some of the most technologically sophisticated companies in the world, in which case they are recklessly incompetent.'

It’s hard to believe that senior executives at UBS and Citi didn’t know that LIBOR was being fixed. If they weren’t in on it directly, it’s likely that they turned a blind eye — precisely because they knew that it was good for the bottom line.”

Read the full post>>

Former City trader Tom Hayes given 14-year sentence for Libor rigging

From The Guardian –

“Former City trader Tom Hayes has been sentenced to 14 years in jail after becoming the first person to be convicted by a jury of rigging the Libor interest rate.

Hayes, 35, a former UBS and Citigroup yen derivatives trader, was convicted of eight counts of conspiracy to defraud.

Sentencing him at London’s Southwark crown court, Mr Justice Cooke said: “The conduct involved here is to be marked out as dishonest and wrong and a message sent to the world of banking accordingly. The reputation of Libor is important to the city as a financial sector and the banking institutions of the City.

“Probity and honesty is essential as is trust. The Libor activity of which you played a leading part put all that in jeopardy.”

When the judge announced his sentence, Hayes – dressed in a light blue shirt and dark blue jumper with black slacks – put his head in his hands and ran his hands through his hair. During the reading of the judgement he shook his head repeatedly.”

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