The Trustee charged with liquidating and winding down the largest bankruptcy in U.S. history - Lehman Brothers Holdings Inc. - recently sued Citibank for $1.3 billion for the bankrupt company’s creditors.
Trustee James W. Giddens filed the suit in U.S. Bankruptcy Court in Manhattan alleging Citibank and several affiliates are refusing to return a $1 billion deposit Lehman Brothers Inc. made after its holding company, Lehman Brother Holdings Inc., filed for bankruptcy. According to the complaint, the deposit was made to ensure that Citibank would continue to provide foreign-exchange settlement services to the unit. In addition to the $1 billion deposit, the Trustee is also seeking to recover $300 million of deposits that Citibank froze at the time.
While the Lehman bankruptcy Trustee is actively pursuing claims, Lehman Principal Protected Note (PPN) holders are not in a good place in the bankruptcy. As unsecured creditors they are towards the end of the line. Secured creditors get paid out first from what is left of Lehman’s assets, and then the bankruptcy Trustee will be able to pay unsecured creditors if and only if anything is left.