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Comment by boffinism | Hacker News Reader

To be fair to them, the hedge fund decided they wanted to keep money that they think _is_ theirs, which they had loaned to Revlon.

Imagine a world where debtors can choose to repay lenders, and then change their minds and take the loan back again. It would make being a lender impossible. So it's sort of understandable if Brigade genuinely believe that, at one point, there was a conscious decision on the part of someone to repay the loan. Given that the sum they received was equal to the exact amount of the loan, it's not completely unreasonable.

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Was Revlon in arrears on their payments? Wasn't Revlon going to pay before Citi fat-fingered the operation?

Because what you're saying goes both ways. The bank doesn't have the right to take money out of my account to pay a loan except for what was arranged as a payment plan.

Just playing devil's advocate here:

That's not Brigade Capital's problem, and that's also not Revlon's problem.

I think it's entirely obvious brigade should return the money. But, playing devil's advocate:

Brigade gets a payment, 'out of nowhere' (it wasn't agreed upon beforehand, nor part of the repayment schedule), from the bank of Revlon, earmarked 'revlon'. Hey, the intent is clear enough, and Brigade sees this as an implicit contract. This transfer can be seen as equivalent to a note from the bank: "I, CitiBank, in my function as the bank of Revlon, hereby prepay some of the debt, and whilst revlon did not personally sign this note, that is okay because I am their bank, you can trust me."

And Revlon, having made no such agreement with citibank, also 'wins' their case and this money isn't scratched out of their accounts.

CitiBank, having made the error, is going to have to eat the 9 digit loss, but is of course allowed to recoup it, according to the normal schedule, and without charging interest (not that this matters much, what with interest being near nil), vs. revlon.

If revlon goes broke before they can, that's a bad day for citibank.

NB: To be clear I think when talking about 9 digits, this is a preposterous interpretation, but it IS one.

>Hey, the intent is clear enough, and Brigade sees this as an implicit contract.

The only way you get anything remotely resembling something such as an implicit contract is by butchering the legal concept into unrecognizability, which admittedly, the tech sector has enabled other sectors to do with wild abandon. A contract requires a meeting of the minds, consideration for all, and to explicitly lay out mutually agreed upon terms. Unless both sides agreed to see it the same way, it isn't a contract. It's a worthy subject to resolve via litigation, and to be frank, out as the Brigade at significant risk of possible criminal charges if a judge is not amused and Citibank heads to the Attorney General.

Isn't the whole point of the UCC to remove all sorts of litigious details in contract situations like making payments?

eg, If I agree to pay my babysitter $50 and write an American-style check (aka bank draft), me and the babysitter don't need to negotiate the finer details of that payment method.

Yes. However, you have the capability to void and recover the sums represented by that cheque. It's built into the system in that sense. This is why most debt servicers implement different flows for early payments. You need an explicit indication from the payer they intended to make that extra payment. It may not seem like as big a thing when you're talking small-claims court amounts of money, but once you hit the bigger tiers of financial transaction, this is exactly why people are dedicated toward ensuring all the i's are dotted and t's crossed in order to ensure payments in the right amount end up in the right places in the right amounts.

The bank doesn't have the right to take money out of my account to pay a loan except for what was arranged as a payment plan.

If you accidentally paid off a loan early do you think you would be able to get your money back from the bank?

Understand your point, but if I was a customer there is zero chance I am investing a cent with them.

My thinking is if they do this with Citibank and a hundred million, I have no confidence in being able to recover my own money in case of a dispute.

I stuck with Wells Fargo after their fraudulent account debacle, and I can attest first-hand that this will happen again, affect more people, and be only relatively as frustrating compared to the last big issue. It's when I look back on before that time that I decided to break with business after changes to Wells Fargo ACH policy in 2018.

In 2018, I was laid off, lost almost everything over five months. I had one bill on autopay that I eventually ran out of funds to pay. IIRC in June 2018, WF stopped denying repeat ACH attempts if, on the first two attempts, the funds were not available and/or WF would not choose to pay it and simply overdraw the account. Every single attempt would now process. On December 3, my account was at $490 when the $600 payment attempted, then again, and again, over and over, for 9 business days. My account was closed with a -$1,800+ balance. I lost count of the number of NSF fees by day four or five. And Wells Fargo decided to pay that payment upon closure of my account. So, I went from $490 on December 3, 2018, to owing almost $2,000 in fees to Wells Fargo two weeks later.

I'll pay it off when I can, as you know, it's still my debt, but while other banks were cutting fees, WF was changing its policies to ramp them up. I ended up in an unfortunate waltz of financial doom with them. And I had a low statistical risk of running into a problem with them because I used so few of their services. Don't leave it up to luck. When you see risky behavior, grab your money and go. They're willing to keep doing crap like this because they know most people think it would never happen to their personal accounts.

A similar thing happened to my wife, from the age of like 12 she had a wells fargo savings account, her mother would deposit $50 each time her father paid child support. It was supposed to be an account that when she graduated highschool and went off to college she would have some money for random things. She and I met during Junior year of high school, and moved in to a shitty apartment near her college at 18, thinking that she had some money to help with the deposit. I paid everything first, then she was going to pay me back.

Turns out her mother had been depositing the $50 each week automatically until she was about 17, but was also randomly over the years withdrawing nearly all of it. And at the time she went in, she was -$240 on the account, and they wouldn't allow her to close it until that was paid off, and they were going to continue feeing her $20 each month for having less than the required amount. By the time we finally had the income available to close the account it had accrued around $1000 in fees.

And yet, for some stupid reason, I am still with Wells Fargo today, 15 years on...

> And yet, for some stupid reason, I am still with Wells Fargo today, 15 years on...

Why?

I hate to rub salt in your wounds, but they have demonstrated that they are unworthy of your business. Acting on this would play a small part in forcing them to either change, or else go out of business.

When I was younger I worked for a wells fargo joint venture that did credit investigations related to mortgages. To this day I'm convinced that the way they set up their QA policy was deliberately designed to enable fraud. I most definitely would not do business with them.

Can we help you get out? I've personally opened accounts with all the popular online banks like Ally, SoFi, Simple, Schwab, Marcus, etc. If you have any questions I'd be very happy to help you leave WF. At the very least you'll have no account fees, way better customer service, and a decent interest rate.

I have bank accounts at almost every major bank in the US, including online banks, but WF is still my primary account. There are just so many services that do a direct debit that make it hard to switch off of. I use privacy for a lot of things now, but the handful of things that need direct debit I just use my wells fargo account.

I'm curious, is this legal on their part? I am very much not an expert, but I almost have to wonder if this is worth consulting a lawyer.

If it were me in your shoes, the amount of raw spite I would feel for Wells Fargo would be difficult to exaggerate.

I am sorry this happened to you, it seems when things get rough crap just all decides to pile on.

Long ago I stopped all auto payments from my checking account. I do the old fashion thing of paying each bill every month on a schedule. I don't really send checks, it is all via bill pay and I can schedule them out in advance so I only really do this twice a month.

If you were a customer of Brigade capital you’d be buying them champagne right now. They they just saved $170 million of your money that you would have had to accept as a loss should Revlon go bankrupt (which it probably will).

They just tatooed "Dear Banks please don't do business with us ever again" on their foreheads though.

Edit: That is if it is a legitimate error-error not citibank try to pull a takesy-backsy.

No, this is just business. Brigade has a duty to its investors to fight tooth and nail to keep this money, just like a defense lawyer has a duty to use every advantage for the client allowed under the law, acquired intentionally or otherwise.

> Brigade has a duty to its investors to fight tooth and nail to keep this money

What kind of duty? Not a legal one, I think.

Arguably they decided to let that be determined by the courts instead of their own good will. Sounds like something a lawyer would recommend doing...

It's like a natural process to these companies. Most likely CITI is getting it back. But it's probably a worthy gamble on the lawyering fees.

No fiduciary duty justifies profit taking off of a mistake or mis-transaction. This is like saying that a hedge fund is justified keeping the proceeds of a check written to the wrong routing/account number. Nothing, and I mean nothing, fiduciary duty be damned, justifies undermining the implicit trust that underpins the banking and financial system. It's why there is such a thing as white collar crime in the first place.

Frankly, the entire chunk of money should be considered legally tainted until legal action is resolved; which means escrow it somewhere and unleash the lawyers.

It’s already under litigation, so Brigade can’t withdraw and spend it. The case is interesting because they might have a chance at keeping the money. In other circumstances (if the money had randomly landed on their account from an unrelated party) they’d have to give it back and there wouldn’t be a story.

The interesting side effect if they actually prevailed over Citi would be general improvement in wire transfer rooms across US. Right now they are mostly sweat shops with focus on speed ( and pleasing big customers ).

All of a sudden, we may see some consideration given to proper verification ( not just quick rubber stamp ).

I think that may happen either way;

Even if Revlon goes under because the courts pull what I'd call a derp, it should create the illustrative case that creates a business niche for higher reliability/risk financial transactions.

> They just tatooed "Dear Banks please don't do business with us ever again" on their foreheads

So have George Soros and Carl Icahn.

You heard of this guy called something like "Don Trump" who had no issue continuing to get bank finance when you think they would have treated his business deals like toxic waste in a radiation dump that somone threw biohazrds all over?

I used to think that this kind of repuational thing meant something. I pick Don as one of many examples just because he's literally gone on from that situation to become the president. Banks need to make big loans. If they make you a big loan, they owe you - go go broke it matters to them. You and me, nah. They'll burn us in a heartbeat when we're financially responsible without much reputation damage to the banks either. Reputation, it's not worth anything. And that is a sad, sad realisation and do not relish sharing it.

That's not totally true. Don Trump had a lot of trouble borrowing money, eventually only Deutsche Bank would deal with him, because they were probably the least ethical bank on Wall Street at the time, and even for them there was a lot of internal controversy about working with him. Yes, ultimately he got the loans and was able to stay in business, but there are other shady operators who didn't and failed, you don't hear as much about them.

Conversely, Warren Buffet famously has a "halo" which means he gets favorable terms because people know that doing business with him will reflect well on them.

Different pockets of finance have different norms about who it's OK to screw and how, and even as an investment professional I don't understand the conventions in areas outside of my specialty. So it's very hard to judge as an outsider what is considered unethical and reputation-destroying, and what is considered aggressive business practices that happen to come at the expense of other sophisticated professionals.

With an utterly terrible reputation Don didn't have real trouble, Don got finance. Every single time. After how many bankruptcies? How many re-structurings where his creditors lost?

You and me would have a lot of trouble getting that kind of financing without a hideous reputation. Don has one and got it. Now he's even the president. Bad reputations count for not all that much at all. And I hate that, fwiw.

Buffet's reputation, now that's a whole nother discussion. Yes it deserves to be better than Don's. Coke, McDonalds and buying off-market at huge discounts to support management against shareholders. Obesity, diabetes and legal resdistribution of people's retirment savings to berkshire hathaway. Yes, a reputation too good to be true nonetheless. I agree.

That's right, hedge funds have a fiduciary duty to their investors.

Fiduciary duty does not mean "must make money at the expense of all other considerations".

fiduciary duty means sometimes not to burn all your bridges. Politics aside, Trump Inc. is blackballed by all but one or two banks due to such tactics.

Edit: And this is not $500 BILLION so you can say, F it, boom or bust, let's try it. The upside isn't that much, relatively speaking, considering the blacklisting downside. Even if Revlon doesn't pay, a large % is already banked or will be in bankruptcy proceedings so it's not a 100% loss.

The real insight will come when you realize every very large scale financial institution you do business with will retain your money without hesitation or remorse if they feel they have the legal right to do it.

Well yes. So would i, if i felt i had the legal right to do it. So would you.

If there was a mistake in the transfer and the money wouldn't belong to me, even if legal, I would return it. I'm sure many would do the same. Not everything that is legal, is moral.

If there was a mistake in the transfer the money wouldn’t legally belong to you.

A dispute about this is exactly what is described in the article.

No, you and I are different.

We would likely be guided by a sense of personal ethics and our own values, which would make us consider returning money even if through a technicality we had the legal right to keep it.

At the level these companies are interacting at, there's no such thing as ethics of this kind. The legal system is the values system, and if they can make money on a legal technicality they'll do it without further thought.

They're more like great vampire squids wrapped around the face of humanity, relentlessly jamming their blood funnels into anything that smells like money, as someone more eloquent than me once noted.

Worth remembering if you find yourself dealing with large scale financial institutions.

But they don’t think it is theirs. They know it was a mistake and decided to “think” it is theirs. This is just basic loan sharking and being shitty.

The allure of investing in hedge funds is the lack of regulation. As courts decide these matters I wouldn’t surprised if that results in some regulation. It will be interesting to see. The banks tend to have deep lobby connections.

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