Correct, you are the first creditor to their money.

Either way, he would have a transaction number, date, and amount; making recovery trivial. Not recovering it, when he has proof of the deposit, would be easily actionable to the point that the bank would not consider ignoring it.

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Are you certain? In 2013 there was a "bail in" for Banks in Cyprus. Money was just taken

I'm certain for US jurisdictions.

Well, I'm English so I won't definitively disagree with you. I will however say, don't put it to the test.

If possible always live in your overdraft