Oil trader IMMS has taken Lebanese bank BankMed to court in the US state of New York accusing it this month of failing to return $1 billion of its deposits when requested, according to court documents seen by Reuters.
BankMed did not respond immediately to a request for comment.
IMMS Chief Executive Murtaza Lakhani, who trades European, Middle Eastern and Asian oil and oil products, said he would not comment beyond the case, filed with the Supreme Court of the State of New York on November 22, reported Reuters.
The lawsuit appears to represent one of the first major challenges to restrictions Lebanese banks have begun applying to transfers and withdrawals as they grapple with a hard currency shortage and fears of capital flight.
Protests that have swept Lebanon since October 17 have put pressure on the country’s financial system, deepening the hard currency crunch and prompting commercial banks to put curbs on foreign currency withdrawals and nearly all transfers abroad.
IMMS, which is incorporated in Belize and has offices in London and Singapore, said in its lawsuit that it had instructed BankMed to return a $1 billion deposit on November 8, 2019.
BankMed responded on November 12 saying it was terminating all of IMMS’s credit facilities “due to the material adverse change in the economic condition of Lebanon and the Lebanese financial market”, according to the court filing.
At the same time, BankMed refused to release the $1 billion deposit, prompting IMMS to file the case in the United States on November 22, according to the court filing.
“By this action, plaintiff IMMS Limited (IMMS) seeks remedies against defendant BankMed SAL (BankMed) for BankMed’s brazen theft of more than $1 billion from its banking client IMMS,” the court filing said.
S&P Global Ratings said on November 14 it had cut BankMed’s rating further into junk territory, citing rising liquidity pressures due to faster deposit erosion. S&P’s long-term credit rating for BankMed is now CCC and the ratings agency said it was vulnerable to further downgrades.
IMMS started working with BankMed in November 2017 by placing short-term deposits for up to nine months earning annual interest rates of up to 6.5%.
IMMS, represented by New York law firm Meister Seelig & Fein, said in its filing that in November 2018 it deposited $1 billion with BankMed for three years at “a high interest rate”.
As part of the same agreement, BankMed agreed to provide credit and services to IMMS including revolving and overdraft credits to help it trade oil, the court filing said.