The New York State Court of Appeals ruled Tuesday that Mohamed Albanna cannot take his seat on the Lackawanna City Council.
Albanna was convicted in 2006 and sentenced to five years in federal prison for illegally sending more than $3 million to his home country of Yemen.
The city charter says no one convicted of a crime involving moral turpitude can hold a city position.
Geoffrey Syzmanski, the city's mayor, and Alabanna have been in the courts ever since, trying to determine whether Albanna was legally allowed to run for the position.
Albanna was elected to the city council in November as the case was working its way through courts.
On Tuesday, the court determined that Albanna is ineligible for the seat.
According to court documents, Albanna's actions "established that defendant was convicted of a crime of moral turpitude" and, as a result, the state "Supreme Court properly declared that he is ineligible to assume the subject office."
It was not immediately clear how the city council would address the empty seat, a position with a term that runs through the end of 2018.