Citigroup will not get back almost $900 million in mistaken payments it sent out, according to a US judgment Monday that called the debacle "one of the biggest blunders in banking history."

Because defendants in the case believed "in good faith and with ample justification" that the payments were for the full Revlon loan, "defendants' clients are entitled to keep the money," US District Judge Jesse Furman said in a 105-page ruling.

The case centers on payments totaling some $500 million Citigroup sent in August 2020 to 10 financial companies who were parties to a term loan to cosmetic company Revlon.

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Citi, the loan's administrative agent, mistakenly paid back the $900 million principal to the members of the lending consortium, rather than interest payments.

Citi quickly realized the error, but was rebuffed the following day by the lenders, which included Allstate Investment and Greywolf Loan Management. These entities thought Revlon was repaying the loan early, said Furman.

Citi plans to appeal the decision.

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"We strongly disagree with this decision and intend to appeal," a Citi spokeswoman said in an email. "We believe we are entitled to the funds and will continue to pursue a complete recovery of them."

Furman said lenders' assumption about repayment made sense given that Revlon was known to be under financial duress due to COVID-19.

"Given a choice between assuming that Revlon had paid off the 2016 Term Loan early, as borrowers sometimes do, and assuming that Citibank or Revlon had mistakenly transferred over $900 million -- something no bank may have ever done before (and may never do again) -- it would have borderline irrational to choose the latter," Furman said.

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Furman pointed in his ruling to a 1991 case, which "unambiguously" settled that New York law holds that "banks making wire transfer payments to bona fide creditors bear a risk of loss should a mistake occur," he said.

Still, Furman noted defendants "are not yet necessarily free to do with the money what they want," noting the possibility of appeal.

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