A federal judge denied Citigroup Inc.’s request to claw back roughly $500 million it mistakenly paid out of its own pocket to investment firms that made loans to cosmetics giant Revlon Inc.

Brigade Capital Management LP and other Revlon lenders can keep the money they collected from Citi when the bank wired them the full amount they were owed instead of the small interest payment that was due, according to a written ruling on Tuesday by Judge Jesse Furman of the U.S. District Court in New York.

The August blunder by Citi, Revlon’s loan agent, satisfied a nearly $900 million debt that Revlon wasn’t due to pay until 2023 and delivered an unexpected windfall to lenders on what had become an increasingly risky investment.

While some lenders that were mistakenly paid returned roughly $385 million to Citi, others refused the bank’s request for repayment, touching off a legal dispute that strained relationships with big investors like Brigade, a longtime Citi client.

Judge Furman issued the decision after holding a trial in December that focused on the pivotal question of what Brigade and other recipients knew or suspected soon after they were paid.

This post first appeared on wsj.com

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