The Strategist

Citigroup cuts profit by $323m due to 'mistransfer'

03/01/2021 - 04:51

Citigroup has been forced to revise its 2020 financial results due to a lost court case about a "mistaken" transfer of $500 million to a number of funds that refused to return the money accidentally transferred to them.

Matt Buck via flickr
Matt Buck via flickr
As a result, the US bank reduced its fourth-quarter revenue by $323 million, according to the bank's filing with the US Securities and Exchange Commission (SEC).

The incident took place back in August last year. At the time, Citigroup assured it had intended to transfer about $8 million in interest payments to creditors of Revlon, to which several funds had provided a total of $900 million to buy the rival. 

However, due to an "operational error", the bank paid the funds the full amount of Revlon's remaining debt and interest at the time. Some of the funds returned the money sent by mistake to Citigroup, while others refused to do so. 

The bank tried to get the funds back through the courts, but the court sided with the funds in mid-February, stating that under New York law they were not required to return funds sent to them by mistake if there was no malicious intent in their actions.

As a result, the bank incurred an additional $390 million in losses in the fourth quarter, and its profit estimate for the quarter was lowered from $5 billion to $4.3 billion.