Citi’s $900 Million Loan Blunder Heads to Regulators and Court

Citigroup Inc.’s accidental payment of about $900 million to Revlon Inc.’s lenders is facing scrutiny on two fronts -- in private talks with regulators and a public fight in court.

Behind the scenes, the bank has begun briefing watchdogs including the Office of the Comptroller of the Currency and the Federal Reserve about how it mistakenly misdirected so much money, according to people familiar with the matter, who asked not to be identified discussing confidential talks. On Monday, the bank sued Brigade Capital Management LP, seeking to recoup a share of the wayward funds.

Citigroup, the third-largest U.S. ...