Citibank can't get back $500M it wired by mistake, judge rules | Hacker News Reader

Citibank can't get back $500M it wired by mistake, judge rules

cnn.com

27 pointspseudolus10 comments

Note that this ruling hinges on a corner case where the recipient is owed money by the sender (presumably in an amount less than or equal to the amount sent).

In effect, Citibank accidentally paid back loans early. Hopefully their terms didn't include prepayment penalties, so at least they can save on interest.

Exactly. I'm surprised the article is so poor to not explain this.It's slightly more complicated in that there is a dispute about what money was owed when.

Unfortunately, they get fewer page views if it's explained in a way that makes the law seem closer to being reasonable here.

Although the article didn't go deep into the ins and outs of the ramifications, I think the article did a reasonable job of explaining the legal situation relevant to the story to casual readers, albeit at the cost of the backstory.

From the article:

> If the beneficiary is entitled to the money and did not know it was accidentally wired, they can keep it. Revlon lenders said they believed Citibank was wiring prepayments for a loan.

I feel one interesting effect of this ruling is that it creates a strong incentive for parties in a credit dispute to plant or corrupt employees in banks that are involved.

The people who process these payments almost have a lot of power - they can send out nine-figure sums of money. But that power is hard to abuse, because “accidental” payments can be reversed by the legal system. They are neutral parties, just making sure the trains run on time, and don’t have a lot of decision-making authority. But if their mistakes can be made permanent, to the advantage of some aggressive distressed debt investors, suddenly the work of these folks just got a lot more important.

When I worked as a mortgage processor this was a major issue we would try to ensure we got right. Fortunately we wired money to title companies who would just give us money back if we screwed up because they wanted our business.

I can't see a federal judge siding with this. A business transaction conducted in error by a lower employee does not entitled you to excessive funds like this. Like I'm not kidding, I could've wired 1 million dollars to wherever at a moment's notice. My supervisors wouldn't know until accounting caught it days even weeks ahead of time...if they caught it.

A federal judge did side with this. This fell into one of the limited exceptions to the law that would require the recipients to normally return the funds, since they were owed the money disbursed and weren’t notified about the mistake prior to receiving the money.

So your company has no obligation, but random person has to keep track of your money, and send it back ASAP? Very convenient, you should also demand interest on your money...

So who gets to keep the interest on the money while the case languishes through the court system?

In the absence of a court injunction, those currently holding the money get the benefits of the money at least until final appeals are settled. The courts may decide that some interest is part of the end settlement, but as far as I've read, those currently holding the money haven't been required to set aside any interest in anticipation of any settlement.

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