(Bloomberg) – Citigroup Inc. scored court orders that freed nearly half of the more than $ 900 million it says were accidentally sent to credit tellers Revlon Inc.
A federal judge on Wednesday ruled $ 127.3 million that HPS Investment Partners LLC refused to return and $ 109.7 million that Symphony Asset Management LLC held. The same judge on Tuesday issued a temporary injunction with release of $ 174.7 million that Brigade Capital Management LP refused to return.
Citigroup prosecutes all three, who together owe $ 411.7 million in Revlon. The bank had acted as an agent on Revlon’s loan, collecting payments from the company to distribute to creditors. Citigroup said it was intended to make interest payments on behalf of Revlon, but accidentally transferred an amount more than 100 times as large from its own funds. It has begun enlightening watchdogs, including the Office of the Currency Controller and the Federal Reserve, about how it accidentally misappropriated so much money, people familiar with the matter have said.
Representatives of HPS and Symphony declined to comment on Tuesday’s suit. Benjamin Finestone, an attorney for Brigade and HPS, told the judge that the companies did not admit the transfer was a mistake, saying it was a “full refund” of the loan.
“This error has not been explained so far,” Finestone said. “There is strong evidence, your honor, that this was in fact a fee.”
For one thing, he said, the August 11 date of the payment that the bank says interest on the loan was “odd” because it was not the normal date of interest payment.
Brigade, which says it is not a Revlon lender itself, told Furman it does not have the $ 175 million. Citigroup paid payments to about 40 funds that Brigade uses as its investor as collateral manager, it said Tuesday.
Read more: Citi’s $ 900 million blunder raises stake in Revlon Showdown
Neither of the two companies that pleaded guilty Tuesday have returned the payments to repeated emails and requests, Citigroup said in the case. Their actions “threaten the integrity of the function of governing body and confidence in the global banking system,” the bank said.
“Many lenders continue to pass on Citibank’s money” for the past 24 hours, and the bank “works closely” with others working together, said Matthew Ingber, a lawyer for Citigroup, U.S. District Judge Jesse Furman said in a conference on Wednesday. He did not name any of the lenders he said would return the funds.
Citigroup’s lawyer said at a previous hearing that Brigade was the only one of dozens of lenders that had ‘flat out’ refused to return the money. The two were back in court on Wednesday as the judge worked out the next steps in their legal battle, including if they were to hold a hearing on the bank’s request for a preliminary injunction forcing the Brigade to return the money. while the case continues.
Citigroup sued Brigade on Monday and then HPS and Symphony late Tuesday. Furman combined the two packages and planned a two-day trial to begin in early September.
“We hope we would not have to file this lawsuit against Brigade,” Ingber said when Furman asked him if there was going to be another lawsuit. “We hope we do not have to file any more lawsuits.”
The case is Citibank NA v. HPS Investment Partners LLC and Symphony Asset Management LLC, 20-cv-6617, U.S. District Court, Southern District of New York (Manhattan).
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