Citibank Sued by Calgary Couple for ‘Opportunistic’ Sales During COVID-19

A Calgary couple has filed a lawsuit against Citibank, accusing the bank of dumping 75 percent of the shares in Tourmaline Oil Corp. the couple had posted as collateral to secure a loan during the financial disruption caused by the COVID-19 pandemic.

According to Robert and Laurene Yurkovich, the bank took advantage of the price war between Russia and Saudi Arabia that was taking place during the COVID-19 crisis and dumped the stock.

Russia and Saudi Arabia have been involved in an oil price war in the last month while the COVID-19 pandemic rages around the world. The price war began when a proposed deal between the countries to cut oil production in response to the drop in demand fell through, according to Yahoo News.

As a result, the price of oil dropped to the lowest price in nearly two decades. Last week, oil prices increased by more than 20 percent after U.S. President Donald Trump said he expected the countries to decrease oil supply and that he expected that Russia and Saudi Arabia would soon reach a deal.

Saudi Arabia has reportedly asked oil producers to join in an emergency meeting. Russia’s energy minister claims that his country may also enter into talks once more.

A meeting of the major oil producing countries was scheduled to take place Monday, but it has reportedly been rescheduled for Thursday.

The oil price war has led to market instability which has created the basis for the Citibank lawsuit.

“The case is about a global financial institution engaging in opportunistic bad faith conduct in respect of two of its individual clients during the height of the 2020 COVID-19 pandemic and global market instability,” the Citibank lawsuit reads.

The couple claims that Citibank held shares that they had posted as security for a loan, plus cash that was applied to the outstanding loan amount. According to the Citibank lawsuit, they had initially negotiated a US$15.5 million line of credit in 2018, pledging shares in Tourmaline as collateral.

The loan agreement stipulated that the price of the Tourmaline stock was maintained at a minimum of $10 a share.

The loan amount was reportedly increased twice in 2019. The first time it was increased to US$20 million, and the second time it was increased to US$35 million.

“Although the loan was not in default or at risk, when the share price was temporarily depressed due to the COVID-19 pandemic and other macro geopolitical events … without authority, justification or reasonable notice, Citibank sold 75% of the shares,” the plaintiffs state in the Citibank lawsuit.

The sale of the shares reportedly yielded just $20.2 million, or “less than half of what the shares were worth just a few months earlier,” according to the Citibank lawsuit. The bank also reportedly applied $6.2 million of the plaintiff’s cash to the loan without having proper authority or justification to do so.

“Citibank sold the Yurkoviches’ shares during a pandemic, when the stock market was in a downward spiral and when the Yurkoviches had limited ability to access legal protection through the courts,” the Citibank lawsuit says.

“Citibank has flagrantly violated its obligation of good faith,” the Yurkoviches argue. They claim Citibank was contractually obligated to apply reasonable standards of fair dealing to their financial agreement.

According to the Citibank lawsuit, after the COVID-19 pandemic took hold across the globe and the oil price war between Russia and Saudi Arabia began near the start of 2020, Citibank and the Yurkoviches entered into a “collar hedging agreement” and set the floor price for the collateral at just $7.25 a share.

However, even with this agreement in place, Citibank allegedly sold off more than 2.6 million of the Tourmaline certificates at $7.76 per share. This selloff allegedly resulted in the market price to drop to $7.44 per share.

According to the Citibank lawsuit, analysts have forecasted the 12-month target price for Tourmaline at above $20, despite their steeply plunging prices they are currently exhibiting.

“The contractual and statutory duties of good faith and honest performance prohibited Citibank from disposing of assets in an artificially and temporarily substantially depressed market,” the Citibank lawsuit says.

Citibank has not yet filed a statement of defence in response to the Yurkovich’s lawsuit.

What do you think of this lawsuit? Should Citibank be held responsible for selling off shares during the financial chaos caused by COVID-19? Tell us your thoughts in the comment section below! 

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