What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing today we're talking about a recent massive blunder on the part of a european banking giant that saw thousands of customer bank accounts enriched by a collective 175 Million dollars, despite santonder group, being the premier spanish bank and one of the biggest banks in all of europe, they somehow had a software glitch that caused them to mistakenly duplicate thousands of transactions. This mistake sent extra money directly to the bank account holders as santander's rival banks, a hugely embarrassing mistake in the industry. However, the recipients of the money won't be able to keep it in this video. We'll explain how such a dumb mistake could happen on such a large scale, why the recipients have to return the money and what kind of trouble they could be in if they decide to spend it first.

The issue originated on christmas day of 2021. Tens of thousands of people's bank accounts appeared to get a christmas kit from the banking giant sauntender. These accounts were mainly located in the uk and, interestingly, most of them seem to have been customers of santonder's rival banks. Various news outlets reported that the occurrence was a technical banking error on the part of santonder.

In total, 75 000 transactions were made, depositing money into people's bank accounts who were not supposed to santonder said it was due to a technical issue on their part that caused certain transactions to be duplicated. It's not clear what exactly caused the error. It's unlikely that santonder will ever describe the full background. However, it is most likely because of an error where third-party businesses, who had accounts with santonder paid money to their own customers and santander mistakenly repeated the payments out of their own balance sheet.

These could be from things like people returning christmas gifts for refunds or businesses. Paying out payroll santonder would then have duplicated these payments using money from santander's own corporate accounts, santander bank apologized for the error and said that no one was left out of pocket because of it. No money was mistakenly taken out of people's accounts. Money was only mistakenly deposited into their accounts.

The bank is currently trying to recover the funds that they sent and they say that they have already successfully recovered much of it, however, based on historical occurrences of similar errors, it's unlikely that they'll be able to get all of it back baking. Errors of this magnitude are exceedingly rare. That's especially true with sophisticated institutions like sontonder, which has more than a trillion dollars of assets in spain's biggest bank. By far, the modern financial system has a complex system of checks and double checks, both at the bank level and at government levels to prevent fraud on all fronts.

That's why you almost never hear about software glitches on your credit card or bank accounts. However, these errors aren't unheard of. In fact, there have been cases of bank errors on a magnitude several times bigger than santonder's recent blunder. Perhaps the most shocking such case was to have citigroup back in 2020.

At the time, city acted as the loan agent for cosmetics company revlon in this capacity city was in charge of paying interest and principal payments on revlon's debt. On behalf of the company on august 11, 2020, citibank, wired 893 million dollars to revlon's lenders, which represents paying off the full principal amount of these loans. Revlon did not in fact, have 893 million dollars sitting in a city bank account. So the vast majority of this payment came from city's own balance sheet.

That was a huge mistake, as they were actually only supposed to pay a 7.8 million dollar interest payment, not the full principal amount upon realizing the mistake city immediately. Had their lawyers approach revlon's lenders and asked for the money back, they were able to recoup 400 million dollars of the funds, but they encountered resistance right off the bat from some of those lenders. For example, one of the lenders was symphony asset management when city contacted them asking for the money back symphony refused to engage with them. Eventually, the issue had to go to court.

This is a case of what's called unjust enrichment, which obligates a recipient of money that they do not rightfully own to return the money to the mistaken center. However, in the case of citigroup, a little-known new york law made this null. That law has its precedent in a 1991 case where the new york court of appeals ruled the opposite that if someone accidentally wires money, they owe to a creditor, the creditor can keep it. The exception is known as the discharge for value rule.

Under that rule, the creditor can keep the funds. As long as the mistake was, unprompted pays off a valid debt and was made without the creditor realizing that it was a mistake in the case of citi. This is what happened. A federal judge ruled that the wire transfers made by city were quote final and complete transactions not subject to revocation, essentially city accidentally paid off a debt balance which made it a final transaction that didn't have to be returned.

Of course, city disagreed with the ruling and the hedge funds who received the money were very pleased with it. But in the case of santander bank's mistake, the erroneous payments could not reasonably be assumed to be paying off any debt, so the discharge for value exception, or any similar exception in the jurisdiction where the transfers occurred would not apply. Because of this. The people who had extra money deposited into their accounts would be obligated to return the money if they refuse or if they spend the money before santander bank can recover the funds they could be in serious legal trouble.

That's what happened to a new orleans resident named kellen spadoni last year. In her case, she closed a brokerage account with about 82 dollars in it as part of the liquidation process. The brokerage was supposed to send her back the 82 dollars to her bank account. However, a clerical error caused the brokerage to instead send her over a million dollars in terms of investing returns.

Turning 82 into a million dollars would be a 1.2 million percent return. Seeing the extra money in her account, she quickly withdrew the money and used it to buy a brand new car in-house. When the brokerage contacted her trying to recover those funds, obviously they were not able to get it back because much of it had already been spent. She ended up going to jail on charges of theft and was fired from her job at the local sheriff's office.

So the people who had extra money deposited into their bank accounts by santander have no reason to be celebrating. They'll almost certainly have to return all the money back and santonder would be the last company to let ordinary citizens get the better end of any bargain. Like many of their big bank peers, they have something of a history of viewing customers as opponents in a game of profit maximization. Just a few years ago, they refined millions of dollars by the uk's financial conduct authority or fca.

According to the fca, santonder failed to transfer 183 million british pounds or about 250 million us dollars to customers when it should have more than 40 000 customers were directly affected. In a scandal where, when bank account holders died, santander took the money in their accounts for themselves. Their processes for dealing with the deaths of customers did not have the sufficient processes to fully identify all the assets of the deceased and follow up with representatives of those account holders to return the money. This led to tens of thousands of bereavement cases never being closed and effectively leaving their deceased customers money in the bank's hands indefinitely.

In addition, once santonder was made aware of these issues, they dragged their feet in resolving them when so much money was at stake. Hundreds of millions of dollars - it's no wonder what the reason could have been. It wasn't until the authorities got involved that they finally started. Closing these cases and paid back with interest the money that was owed to the deceased customers estates.

They also had to pay a fine of over 50 million dollars to financial conduct authority over the scandal. So the thousands of people who have their bank accounts mistakenly enriched by sontonder did not in fact get the christmas gift that they may have thought santonder will most likely recover the majority of these funds in cases where those funds have already been spent. The people who spent it will probably end up doing some time in jail. The only real damage that santander will occur is a reputational harm and embarrassment of accidentally sending nearly a quarter billion dollars to random people.

Alright, guys that wraps it up for this video. If you enjoyed this content, make sure to smash the like button and subscribe, so you don't miss future videos in the meantime. Thank you. So much for watching and we'll see you in the next one wall, street millennial, signing out.