Hedge Funds: Citibank Accidentally sends $175 Million to Brigade Capital
Lawsuit Follows Mistaken Payment.
Citibank accidentally wired $175 million to Brigade Capital Management. The hedge fund has not returned the money, which led Citibank to file a lawsuit. The bank hopes to get the money back and argue that it was an “operational mistake.” In court documents, Citibank explained that its intention was to send Brigade Capital $1.5 million in interest payments on a loan. This loan was directed to cosmetics company Revlon. Revlon creditors also received faulty wire transfers.
According to the bank, “Brigade has taken the baseless position that Citibank’s overpayment … served to pay off Revlon’s entire principal balance as well.” The bank also stated in its complaint, “Any other outcome would threaten the stability of the banking system [and] reward bad actors that try to capitalize on operational mistakes…We quickly caught our payment error and are taking the appropriate actions to recover those funds.”
Revlon acquired cosmetics brand Elizabeth Arden financed by a $1.8 billion loan. Brigade Capital has a stake in this loan, and Citibank is in charge of collecting the payments and distributing them to lenders. Due to the Coronavirus pandemic, the cosmetic industry is suffering. Revlon in particular is down nearly $20 per share since last year. Citi cites that there is no reason for Brigade Capital to receive that much money from Revlon.
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