The Sentry
Undue Influence Over Commercial Banks
Exploiting The Weakness of Dinar Banking
In eastern Libya’s commercial banks, where Gadalla holds sway, standard banking procedures are often subverted. Behind Gadalla stands the Haftar family’s political and coercive power, while the CBL in Tripoli has tended to quietly absorb the resulting financial abuses.
Two scandals that illustrate this trend burst into public view in the spring of 2024. In May 2024, Wahda Bank experienced a large and unusual disruption amid what commentators called the “zero-clearing incidents.”
In a scheme that involved 151 accounts, including 10 corporate accounts, Wahda Bank issued certified checks—totaling about 300 million dinars ($55 million)—through manual processing, meaning the CBL’s electronic clearing system was not used.
Later, when the transactions were processed through the CBL’s central system, it turned out that the Wahda Bank accounts behind the checks lacked sufficient funds.
The CBL suspended the suspicious accounts at Wahda Bank but maintained a low-disclosure posture, neither publicly denouncing nor explaining the incident.
Forcing the Benghazi bank to absorb the 300 million dinars would have destabilized the institution and threatened salary payments to innocent families in eastern Libya.
Beyond the archaic character of the CBL’s checks and balances, the May 2024 Wahda Bank incident reflects Gadalla’s influence over eastern Libya’s banking sector.
Indeed, multiple sources interviewed by The Sentry mentioned Gadalla’s tacit control over the institution at the time of the “zero-clearing incidents.”
Gadalla also sits on Wahda Bank’s board of directors. Wahda Bank did not respond to The Sentry’s request for comment.
Another irregularity, which occurred in April 2024, involved letters of credit. A whistle‑blower from the National Commercial Bank sent a file to the CBL in Tripoli proving that letters of credit worth 400 million dinars (about $88 million at the time) had been approved, even though the applicants never lodged the matching dinar balances.
The paperwork featured the Turkish-based company of Zliten-native and businessman Fauzi “Abudaghel” al-Muqla, who is married to the sister of Saddam Haftar’s wife.
Muqla’s privileged standing within the Field Marshal’s family let him skip key safeguards: the bank ignored the missing dinar deposit.
This letter-of-credit abuse took place against a backdrop in which the National Commercial Bank was already under Gadalla’s sway, according to several sources familiar with eastern Libya’s banking sector.
As millions of dollars flowed to the Turkish entity’s dollar accounts at al-Masraf in the UAE, Saddam Haftar’s circle reaped foreign currency without even having to put up the corresponding dinar amount upfront. Neither Muqla nor the National Commercial Bank responded to The Sentry’s requests for comment.
Both Ends of the Wire
The abuse of letters of credit—a persistent feature of Libya’s financial landscape for more than a decade—has intensified since 2022. The deterioration has affected commercial banks in both eastern and western Libya, but those headquartered in the northeast present a distinct concern.
Gadalla exerts control on both ends of the letter-of-credit circuit. In addition to his authority over eastern Libya’s main banks, he reportedly requires foreign-based entities seeking letter-of-credit proceeds from Libya to open U.S. dollar accounts at al-Masraf.
Straddling Benghazi and Dubai, Gadalla extracts informal commissions on dollar outflows originating from the CBL to the UAE.
Such concentration of power in the hands of a single individual represents a threat of a different order. It contributes to accelerating the depletion of Libya’s dollar reserves and obstructs legitimate trade, as lawful importers are forced either to pay the informal commissions or to exit the market entirely.
It also weakens anti-money laundering enforcement. With both the previous and current CBL governor reluctant to denounce banking scams in eastern Libya, the boundary between legitimate and illicit finance has grown blurrier, leaving Haftar’s faction wealthier and the dinar ever more vulnerable.
Chinese Drones Scandal
Gadalla’s illicit activities extend beyond the banking sector and beyond Libya, with companies under his control also serving as vehicles for arms smuggling and other questionable transnational endeavors.
In April 2024, Canadian authorities revealed a conspiracy involving at least two Libyan employees of the International Civil Aviation Organization (ICAO), a UN agency based in Montreal. The investigation found that the two individuals had participated in a broader scheme meant to facilitate the procurement of Chinese-manufactured combat drones for the Haftar family in Benghazi.
Stages of the acquisition program were financed not through monetary payments but through illicit oil schemes such as deliberate discounts on NOC crude sales to Chinese oil firms.
Notably, one of Gadalla’s Dubai‑registered companies paid for the sea transport of the drones, tying him to the operation. The breadth of this maneuvering was made clearer in January 2025, when the Canadian press revealed that the Federal Bureau of Investigation (FBI) had quietly arrested Chinese national James “Kuang Chi” Wan, a former ICAO employee with suspected links to Beijing, as early as January 2023. Although Wan was detained at Seattle-Tacoma International Airport two years earlier, his case remained under seal until reporting established that he was suspected of participating in the same attempted sale of more than $1 billion worth of armed drones and other materiel from China to eastern Libya.
According to the FBI complaint attached to the arrest paperwork, Wan told investigators that one of the co-conspirators was a special advisor to Chinese President Xi Jinping.
Even if that claim remains unproven, the mechanics of the scheme point to senior-level coordination in both Beijing and Benghazi: Libya’s NOC sold crude oil to Unipec in August 2022 at an abnormal discount, creating a de facto transfer of wealth from Libya to a Chinese state-linked buyer.
As for the drone supplier, FL-1 drones manufactured by state-linked Zhongtian Guide Control Technology Co., were shipped from Qingdao to Benghazi in March and April 2024 as part of the same arrangement.
This coordination is consistent with what Canadian prosecutors described as an illicit “commercial entente” in which senior LAAF commanders sought to exchange NOC oil for Chinese military technology.290 Such a transaction could not have proceeded without the approval of the Haftar family, above all Saddam Haftar.
The LAAF did not respond to The Sentry’s request for comment. The large FL-1 combat drones, disguised as wind turbines, were intercepted in southern Italy in June 2024.
Under UN Security Council Resolution (UNSCR) 1970, any transfer of arms, related materiel, or military-use equipment to Libya without prior approval from the 1970 Libya Sanctions Committee is a violation of the UN arms embargo and international law.
The FL-1 transfer attempt appears to have violated that embargo. The co-option of the NOC to facilitate the circumvention of the UN arms embargo was not an isolated occurrence during Benqdara’s NOC chairmanship from 2022 to 2025.
In a separate episode, the Haftar family utilized the NOC to secure the services of an Irish private military contractor.
Spanish Drones Scandal
In 2023, Spain’s Guardia Civil and French police intercepted illicit arms shipments valued at 14 million euros ($16.4 million). The materiel—comprising 44 drones, thermal cameras, helmets, and other military equipment from Spanish manufacturers Shadow Lynx, Aeronáutica DTS, and DUMA Engineering—was intended for Saddam Haftar in Benghazi.
The Spanish authorities later made it publicly known that they had arrested a Libyan national and four Spaniards involved in a plan to violate the UN arms embargo. Yusef al-Ubeidi, the Madrid-based individual suspected of having helped coordinate the arms purchase, told investigators that Gadalla, acting for Saddam Haftar, was involved. According to the Spanish press and a senior Spanish official with knowledge of the scheme, one of Gadalla’s Dubai firms played a role in the scheme, which included wiring 14 million euros to the Spanish firms as part of a documented plan to ship the equipment to eastern Libya.
Maritime Smuggling
In 2025, an arms smuggling incident off Greece implicated Gadalla and UDS Shipping Services, a Dubai maritime company under his control. The episode was tied to the weapons pipeline Saddam Haftar established after the outbreak of civil war in Sudan in April 2023, turning Benghazi into a major transit hub for weapons supplied by the UAE and destined for the RSF in western Sudan’s Darfur region.
In late July 2025, the Alushibe Group’s 475-foot container ship, the Aya 1, lifted 350 containers filled with ammunition and about 200 large military-use vehicles from the UAE and headed for Benghazi.
The maritime transfer, ultimately intended for the RSF in Sudan, was intercepted off Crete by Greek and Italian patrol boats enforcing the UN arms embargo on Libya. A search at a Greek port revealed the military-use vehicles despite a manifest claiming the ship was carrying cosmetics and electronics to the Netherlands.
Still, the maritime officers released the Aya 1 without confiscating the thousands of tons of military-use hardware. One possible explanation for Greece’s leniency is that, in the summer of 2025, Crete was facing a surge in irregular migrant arrivals from eastern Libya, an area under Haftar family control.
In the months following the Greek government’s decision not to seize the entire shipment, its relations with eastern Libya’s leaders improved. Gadalla didn’t respond to The Sentry’s request for comment. EU authorities documented the incident, which likely violated UN arms embargoes on Libya and Darfur.
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