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Citi’s $900 Million ‘Clerical Error’ Is Worst Wall Street Bungle in a Long Time

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Citi's $900 Million 'Clerical Error' Is Worst Wall Street Bungle in a Long Time(Bloomberg) — Even for Citigroup Inc., it was big money. On Wednesday, loan operations staff at the New York bank wired $900 million, seemingly on behalf of Revlon Inc., to lenders of the troubled cosmetics giant controlled by billionaire Ron Perelman.It was a mistake for the ages — a “clerical error,” as Citigroup told lenders — that’s now plunged the bank into a battle between the Perelman empire and a corps of sharp-edged investment funds that have become its impatient creditors.One financier involved likened the surprise payment to finding a fortune on the sidewalk. And, as of late Friday, several hedge funds who claim Revlon was in default on the loan were showing no signs that they’ll be giving Citigroup its money back.The wayward transfer of nearly a billion dollars appears to be one of the biggest screw-ups on Wall Street in ages, and it’s set tongues wagging in financial markets. The question everyone is asking: how could this happen?A spokeswoman for Citi declined to comment. A representative for Revlon said in an emailed statement that Revlon itself didn’t pay down the loan, or any portion of it.“It’s a billion-dollar clerical error,” said Michael Stanton, a former restructuring and bankruptcy adviser. “This is probably knocking around some very big rooms at Citibank.”Acceleration DemandAt the center of the story is an increasingly ugly battle between Revlon and a group of lenders who sued the cosmetics company and demanded immediate repayment of a term loan that Revlon has coming due in 2023. Working with UMB Bank, the lenders are claiming that Revlon shifted some intellectual property rights that had been backing their loan into collateral for new debt.The lenders, including Brigade Capital Management, Symphony Asset Management and HPS Investment Partners, are seeking a court order forcing the return of the collateral, which includes brand trademarks. Citi, the administrative agent on the loan, was also named as a defendant in the lawsuit, although it was in the process of resigning from the agent role.Around the same time the lawsuit was filed, the nearly $900 million — an amount equal to the full principal value of the loan, plus accrued interest — landed in the lenders’ bank accounts, according to people familiar with the matter. Now, Brigade, Symphony and HPS are among that are refusing to hand the cash back, said the people, who asked not to be named discussing a private matter.“This is what the investors asked for — they wanted their loan to be paid off,” said Bloomberg Intelligence senior distressed debt analyst Phil Brendel. “Given their suit is against Citibank as well, it isn’t clear why they would hand the money back.”The payment was a particularly welcome surprise considering that the loan trades for less than 30 cents on the dollar, signaling that investors have dim hopes of getting a full recovery under normal circumstances.Citi on Friday had yet to receive a majority of the funds back, though repayments continued to trickle in, the people said. The bank has launched an internal investigation into the matter, one of the people said. The mistaken payment was first reported by LevFin Insights.Read more: Revlon sued over collateral for takeover-deal loanRevlon said it would fight UMB’s “meritless” lawsuit and that the bank doesn’t have standing to sue because it’s not the agent on the loan.“This group of lenders has repeatedly resorted to baseless accusations in an attempt to enrich themselves and hurt the company by blocking Revlon from exercising its contractual rights to secure the financing necessary to execute our turnaround strategy and navigate the Covid-19 crisis,” Revlon said in an earlier statement.Revlon, controlled by Perelman’s MacAndrews & Forbes, has struggled to remain relevant and stem falling sales amid competition from Estee Lauder Cos. and a host of smaller companies using social media to lure customers. The cosmetics company has been hit hard by the pandemic and is seeking to rework its $3 billion of borrowings.(Updates with Citi’s plans for an internal investigation in 12th paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.


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Don’t miss the most important news of the week! Take a look at Emprendenews

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IKEA reprints and delays the release of its 2021 catalog and other news by less than 5 minutes.

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Theft of $2.3M from GOP shows how campaigns are juicy targets for hackers

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When the Wisconsin Republican Party disclosed this week that hackers had stolen millions of dollars from its account—funds designated for President Trump’s re-election—Oren Falkowitz was not surprised.

A former NSA hacker who now runs cybersecurity company Area1, Falkowitz says political campaigns’ record levels of fundraising this cycle—and campaigns’ habit of boasting about the money they raise—has made them a prime target for cyber criminals. He points in particular to the popularity of Democratic and Republican parties’ respective fundraising platforms, ActBlue and WinRed, and tweets like this one:

In the case of the theft of the Wisconsin GOP, it’s unclear precisely how the hackers stole the money. Party chairman Andrew Hitt told the Associated Press the incident began with a phishing attack that allowed the hackers to pose as vendors. The party then paid $2.3 million worth of invoices from the fake vendors, wiping out much of its coffers.

The Wisconsin GOP did not respond to a request for further details about the attack, but Hitt’s description suggests it’s likely the hackers took over the email accounts of legitimate vendors and tricked party officials into paying the invoices.

In his comments to the AP, Hitt also said he was unaware of any other state GOP groups being targeted by similar attacks—a claim Falkowitz says is improbable

“Everyone is a ‘target.’ To say that one is unaware of people, or organizations being targeted is to be totally unaware of what the threat in cyberspace is,” he said.

Falkowitz says lax email security is what makes such phishing-based scams possible. And while anti-phishing software can help detect such scams, many in the political world are not using it. A recent report by Area1 revealed that few of the hundreds of election officials surveyed were deploying anti-phishing tools and many said they were conducting business using their personal emails.

While hackers posing as vendors is one threat to political campaigns, Falkowitz warns there’s also a risk of criminals taking over the emails of party officials to request money from ActBlue or WinRed.

Both ActBlue or WinRed provide plug-and-play donation tools for candidates and allied political causes, letting them easily add a “Donate” button to their websites. The platforms collect contributions from millions of small donors and then wire money to the various candidates and groups. And while they work to secure their own operations from hackers, they view securing campaigns as the role of the national parties.

“It is standard for groups of our size and nature to see attempted phishing attacks on a regular basis. We have a range of technical protections in place and conduct regular employee education on the topic. We are not aware of any successful attacks,” said a spokesperson for ActBlue who described campaign security as “not in our purview.’

WinRed, which handles donations for the Wisconsin GOP, did not respond to a request for comment about this week’s hacking incident.

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GlaxoSmithKline plc Just Beat EPS By 44%: Here’s What Analysts Think Will Happen Next

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GlaxoSmithKline plc Just Beat EPS By 44%: Here's What Analysts Think Will Happen NextGlaxoSmithKline plc (LON:GSK) shareholders are probably feeling a little disappointed, since its shares fell 3.9% to…


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