An American family suing the Bank of China in a US terrorism case accused Israel on Tuesday of caving in to Chinese pressure by blocking a key witness from testifying.

The court filing at a New York federal courthouse included some potentially embarrassing accusations against Prime Minister Benjamin Netanyahu, including that he barred the witness from testifying in order to bring “75 of his closest friends and family” on an official visit to China in May.

The hearing came as China’s foreign minister is visiting Israel.

The family of Daniel Wultz, a 16-year-old south Florida boy killed in a 2006 suicide bombing in Israel, says that Palestinian terrorist groups transferred millions of dollars through the government-owned Chinese bank, even after Israel warned it of the transactions. The money went from Iran and Syria to wealthy Palestinian families in the southern Chinese city of Quanzhou, where it was laundered and sent to Hamas and Islamic Jihad terrorists in the Gaza Strip.

The family is seeking hundreds of millions of dollars in damages, claiming the bank ignored the warnings.

Last month, Israel filed a motion that argued that if Uzi Shaya, a former counter-terrorism agent, was allowed to testify, he could spill unspecified state secrets.

In their court filing Tuesday, the family claimed that after years of support for the suit, Israel had backed down under heavy Chinese pressure. It asked the court to reject Israel’s motion and allow Shaya to testify, as well as turn down a Chinese request that the case be dropped because a key witness — Shaya — would not be taking the stand.

Shaya has been identified in court papers as the key witness in the case. As a member of a secret intelligence unit charged with preventing funds from reaching Palestinian terrorists, he participated in a number of meetings with Chinese officials and expressed willingness to testify about the content of those discussions if Israel permits him.

The unit, a joint Mossad-Shin Bet-National Security Council initiative, was first revealed in the court documents, Yedioth Ahronoth reported on Wednesday. The organization itself recruited families of victims to file lawsuits against banks that allowed money to reach Palestinian terrorists, promising the cooperation of senior government officials.

China's Prime Minister Li Keqiang and Prime Minister Benjamin Netanyahu review an honor guard at the Great Hall of the People in Beijing on May 8, 2013. (Photo credit: Avi Ohayon/GPO/FLASH90)

China’s Prime Minister Li Keqiang and Prime Minister Benjamin Netanyahu review an honor guard at the Great Hall of the People in Beijing on May 8, 2013. (Photo credit: Avi Ohayon/GPO/FLASH90)

In the documents, Wultz’s parents say the Israeli government provided them with important documents, bank account numbers and other information to bolster their case. They also claim that Israel repeatedly said it would allow Shaya to testify before a sudden change of heart.

“The complaint was filed only after the government of Israel repeatedly assured my attorneys that it would provide cooperation and support for our allegations,” said Yekutiel Wultz, Daniel’s father, in a written statement obtained by Haaretz.

The Israeli government also “identified and voluntarily designated Uzi Shaya as the witness,” he added.

Yedioth reported last summer that China had threatened to cancel a visit by Netanyahu earlier in the year unless he agreed to prevent Shaya from testifying.

In a declaration, Wultz’s mother, Sheryl Cantor Wultz, said Shaya told her last May that China was putting heavy pressure on Israel.

“Mr. Shaya told me that Prime Minister Netanyahu had wanted to visit China for a long time but was not invited to do so. Now he had been invited by high-level Chinese government officials for a special visit and was encouraged to bring 75 of his closest friends and family, who were treated like royalty. The trip was condition on Mr. Shaya not testifying,” she said.

The family says that in a phone conversation last June, Netanyahu’s then-national security adviser, Yaakov Amidror, “did not deny” his boss had succumbed to Chinese pressure. Amidror reportedly argued that the goal of the suit was to change Chinese policy on the funding of terrorists, and that that aim had been reached. He agreed, however, that the Bank of China must be made to pay for its decisions

“While we are respectful of China’s interests, and of the diplomatic pressure to which Israel has been subjected, those interests and that pressure cannot be permitted to obstruct the ability of American courts to hear critical evidence,” said Wultz family lawyer David Boies in a statement.

Netanyahu led a delegation to China in May that the documents say included “five days of sightseeing and meetings.”

The case has threatened to embarrass Netanyahu, who has portrayed himself as a leading voice in the global war on terrorism.

Netanyahu’s office declined comment. On Tuesday, it repeated its previous statement that Shaya’s testimony could harm Israeli national security.

“State agencies are obligated to ensure that the information to which civil servants are exposed in the course of their work will remain confidential,” Netanyahu’s office said in in a statement. “Therefore, the State of Israel asked the US court to cancel the subpoena it issued against a (former) Israeli civil servant ordering him to testify in the US in the damages suit filed by victims of terror against the Bank of China.

“After a comprehensive review of the matter, the State of Israel decided that it cannot permit the former employee to hand over any information obtained by virtue of his position as a civil servant. Giving such information could harm Israel’s national security, endanger Israel’s ability to defend those living in its territory against the threat of terror and other grave threats, and undermine international cooperation in the battle against terror. Moreover, requiring the employee to testify on matters of this sort would undermine the immunity that the State of Israel, like every other state, enjoys against legal proceedings in foreign countries’ courts.”

The statement also emphasized that Israel identifies deeply with the family’s pain.

Israel has until January 6 to respond to the Wultzes’ motion.

The case is being tried in US federal court because the financial transfers allegedly were processed by the bank’s US branches. Adding to the high profile of the case, Sheryl Cantor Wultz is a cousin of House Majority Leader Eric Cantor.

In addition to the Wultz family, nearly two dozen Israeli families of people killed in Palestinian violence are pursuing similar claims against the bank. Those families’ lawyers are also seeking Shaya’s testimony.