5 ms·

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 debtor

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.

ferros 6y ago
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.
- sudhirj 6y ago
  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).
  - satisfaction 6y ago
    That's right, hedge funds have a fiduciary duty to their investors.
    - lann 6y ago
      Fiduciary duty does not mean "must make money at the expense of all other considerations".
    - onetimemanytime 6y ago
      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.
  - KONAir 6y ago
    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.
    - sudhirj 6y ago
      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.
      - lann 6y ago
        > 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.
        dmix 6y ago
        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.
      - salawat 6y ago
        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.
        sudhirj 6y ago
- ooobit2 6y ago
  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.
  - jermaustin1 6y ago
    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...
- CPLX 6y ago
  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.
  - twic 6y ago
    Well yes. So would i, if i felt i had the legal right to do it. So would you.
    - muro 6y ago
      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.
      - JackFr 6y ago
        If there was a mistake in the transfer the money wouldn’t legally belong to you.
        Bootvis 6y ago
        A dispute about this is exactly what is described in the article.
    - CPLX 6y ago
      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.
raverbashing 6y ago
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.
- rzwitserloot 6y ago
  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.
  - salawat 6y ago
    >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.
TheCondor 6y ago
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.

ferros 6y ago

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.

sudhirj 6y ago
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).
- satisfaction 6y ago
  That's right, hedge funds have a fiduciary duty to their investors.
  - lann 6y ago
    Fiduciary duty does not mean "must make money at the expense of all other considerations".
  - onetimemanytime 6y ago
    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.
- KONAir 6y ago
  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.
  - sudhirj 6y ago
    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.
    - lann 6y ago
      > 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.
      - dmix 6y ago
        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.
    - salawat 6y ago
      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.
      - sudhirj 6y ago
ooobit2 6y ago
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.
- jermaustin1 6y ago
  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...
CPLX 6y ago
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.
- twic 6y ago
  Well yes. So would i, if i felt i had the legal right to do it. So would you.
  - muro 6y ago
    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.
    - JackFr 6y ago
      If there was a mistake in the transfer the money wouldn’t legally belong to you.
      - Bootvis 6y ago
        A dispute about this is exactly what is described in the article.
  - CPLX 6y ago
    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.

raverbashing 6y ago

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.

rzwitserloot 6y ago
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.
- salawat 6y ago
  >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.

TheCondor 6y ago

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.