An international oil trader is suing a Lebanese bank in the United States over failing to release $1 billion in deposits, court documents showed, charges the banking institution denied on Thursday.

IMMS has filed a suit against BankMed in the Supreme Court of the State of New York over the "brazen theft of more than $1 billion", according to court documents dated November 22 and seen by AFP.

The lawsuit comes as Lebanon grapples with widespread anti-government protests since October 17, a free-falling economy, and an escalating liquidity crisis.

The oil trader, which is incorporated in Belize, said it asked to withdraw its money on November 8, and received no response for several days, according to the court documents.

It said the bank on November 12 informed it was terminating overdraft and letter of credit facilities due to "the prevailing circumstances and to the material adverse change in the economic condition of Lebanon and the Lebanese financial markets".

BankMed on Thursday strongly denied the allegations.

"The $1 billion deposit is a blocked deposit by instructions of IMMS maturing in about 2 years from now," it said.

Lebanon has been grappling with widespread anti-government protests since October 17, a free-falling economy and an escalating liquidity crisis
Lebanon has been grappling with widespread anti-government protests since October 17, a free-falling economy and an escalating liquidity crisis AFP / Patrick BAZ

"Between October 30 and November 12, 2019, BankMed discovered material breaches of contract and attempts by IMMS to direct funds due to BankMed overseas," it said.

"BankMed opposed such attempts by IMMS and took appropriate actions."

It said the banking contract was subject to Lebanese law and that it would submit its response to a court hearing in Beirut next month, without giving a specific date.

BankMed is chaired by Mohammed Hariri, a cousin of outgoing Prime Minister Saad Hariri's late father Rafik.

Nazek Hariri, the widow of the embattled premier's father, sits on the bank's board of directors -- as does the current interior minister, Raya al-Hassan.

Since September, debt-saddled Lebanon has had a liquidity crisis, with banks rationing the withdrawal of dollars.

The exchange rate in the parallel market has shot up from the pegged rate of 1,507 pounds to a dollar to more than 2,000.