More than five years after Lebanon’s financial system imploded, the consequences continue to reverberate far beyond the country’s borders. What began as a domestic currency and banking crisis has now spilled into international courts, with aggrieved depositors seeking justice where Lebanese institutions, crippled by political interference and chronic dysfunction, have failed to act. The latest case to capture attention involves Société Générale de Banque au Liban (SGBL), one of the country’s most prominent commercial banks, now facing a civil lawsuit in the United States for allegedly refusing to honor a cashier’s check owed to a Lebanese-American businessman.

The lawsuit, filed in the US District Court for the Southern District of Florida, is being brought by Joseph Zoghaib, a dual national who claims SGBL knowingly issued checks it could not honor. According to the complaint, SGBL drew the $336,000 check from accounts at Banque du Liban (BDL), Lebanon’s central bank – itself named as a defendant – even though it allegedly knew that such payments could no longer be processed amid the country’s spiraling financial collapse.

While neither SGBL nor BDL have publicly commented on the case, court filings reveal that SGBL recently requested an extension until January 12 to formally respond. The case is now entering the discovery phase, though both sides have agreed to seek resolution through court-supervised mediation, which could delay or potentially prevent a trial in 2025.

To understand how a dispute between a private depositor and a Lebanese bank ended up before a US court, it is necessary to revisit the extraordinary circumstances that arose in late 2019. For decades, Lebanese banks operated under a system that effectively pegged the Lebanese pound to the US dollar, allowing depositors to freely open dollar-denominated accounts, transfer funds abroad, and receive attractive interest rates. The appearance of stability, however, masked deep fragilities: vast public debt, a banking sector heavily exposed to government borrowing, and a central bank running what some economists later described as a state-engineered Ponzi scheme.

When foreign inflows slowed and political unrest erupted in October 2019, Lebanon’s financial edifice collapsed with astonishing speed. Banks shut their doors for two weeks, only to reopen under new, unwritten rules that froze withdrawals, blocked transfers abroad, and trapped billions of dollars in what became known as “lollars” – dollars that existed only nominally inside the Lebanese banking system but had no liquidity in the outside world.

The result was catastrophic. Ordinary Lebanese citizens found themselves unable to access savings accumulated over decades. The Lebanese pound, once stable, lost more than 80% of its value within months before continuing its free fall in subsequent years. Families were impoverished, businesses shuttered, and social unrest intensified as people literally stormed bank branches in desperation.

Among the many legal battles that followed, several depositors – especially citizens with dual nationality – turned to courts abroad. In one notable case, the British legal firm Fountain Court Chambers secured a ruling in 2022 against a Lebanese bank on behalf of a UK national, forcing the institution to pay funds held in a trapped account. These international lawsuits have become a lifeline for depositors seeking alternatives to the dysfunctional Lebanese judiciary, where cases often languish amid political pressures and an under-resourced court system.

Against this backdrop, Zoghaib’s lawsuit is emblematic of a broader pattern of distrust between depositors and the Lebanese banking sector. In his complaint, Zoghaib asserts that SGBL issued the $336,000 cashier’s check in 2021 to allow him to retrieve funds from his own account, which held US dollar deposits. Yet when he presented the check for payment in Miami in 2024, it was dishonored – an outcome he alleges SGBL anticipated all along.

According to the lawsuit, SGBL “fraudulently induced” him to maintain his deposits by assuring that the funds were accessible and that US dollars could still be transferred abroad. The complaint further asserts that SGBL misrepresented its financial stability and failed to disclose the full extent of the Lebanese banking system’s insolvency.

More strikingly, Zoghaib accuses SGBL of “colluding” with BDL to prevent the check from being cleared. He alleges that the central bank used vague prohibitions from foreign regulators as a pretext to block settlement, even though its own financial deterioration was the real cause.

In comments to Daraj, a Lebanese investigative journalism outlet, Zoghaib articulated frustration shared by countless citizens: “This is an issue that unites us all, transcending everything – sects, politics, and social classes. Whether we have $5, $5 million or $50 million, we’re all in the same boat.”

SGBL has not only faced financial fallout but also significant reputational challenges. The bank’s majority owner, Antoun Sehnaoui, has been embroiled in legal disputes with Daraj over reporting that linked SGBL to Riad Salame, the former central bank governor long accused of orchestrating financial mismanagement and corruption.

Salame himself was sanctioned by the United States in 2023 for allegedly enriching himself and associates through complex shell-company networks that diverted hundreds of millions of dollars into European property investments. Lebanese banks, including SGBL, have come under scrutiny for their dealings with Salame and their role in sustaining the financial ecosystem that ultimately collapsed.

Daraj has been summoned by Lebanon’s Cybercrime Bureau for its investigative work, a move media freedom advocates see as an attempt to intimidate journalists rather than a legitimate legal process. The outlet argues that such cases belong before the Publications Court – the proper venue for defamation-related matters – not criminal investigators.

While Zoghaib’s case is unique in its specific circumstances, it symbolizes a much larger struggle: the attempt of depositors to reclaim financial rights in a system that has consistently failed them. The outcome of this lawsuit could influence how similar cases progress, especially for dual nationals with access to foreign courts.

If the US court ultimately rules in favor of the plaintiff, the decision could strengthen the legal strategy of other depositors seeking compensation from Lebanese banks abroad. It may also put added pressure on banks to negotiate settlements or participate more actively in the stalled national recovery process, which remains mired in political paralysis and disputes over who should bear the enormous financial losses.

For now, the case moves toward mediation – a step that could expedite resolution but may also obscure the deeper transparency and accountability that many Lebanese citizens continue to demand. Whether the matter settles quietly or proceeds to trial, it underscores an enduring truth: Lebanon’s financial collapse was not merely an economic event but a profound breach of public trust. And for many depositors, that trust cannot be restored without justice, wherever in the world they must go to seek it.

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The post Lebanese bank faces US civil suit amid lingering fallout from nation’s financial collapse appeared first on BLiTZ.

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Source: Weekly Blitz :: Writings