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In a 3-0 decision, the 2nd U.S. Circuit Court of Appeals in Manhattan said the lenders had not been entitled to repayment, and were on notice that the wiring was a mistake.
The case highlights risks in a banking industry that wires an estimated $5.4 trillion each day.
Neither Citigroup nor lawyers for the lenders immediately responded to requests for comment.
New York-based Citigroup, acting as Revlon’s loan agent, in August 2020 mistakenly prepaid an $894 million loan for the cosmetics company controlled by billionaire Ronald Perelman that was not due until 2023. The bank had intended to make a routine $7.8 million interest payment, and some recipients returned their payouts.
But 10 asset managers, including Brigade Capital Management, HPS Investment Partners and Symphony Asset Management, whose clients included the Revlon lenders, kept the money they received. They said Citigroup paid exactly what was owed, and they had no reason to believe a sophisticated bank would err so badly.
The asset managers also said a prepayment seemed plausible because Perelman had bailed out Revlon before.
Citigroup said the overpayment left the asset managers with a huge windfall.
Revlon filed for Chapter 11 bankruptcy protection on June 15.
