New York Attorney General Letitia James has taken legal action against the surety company in possession of a $175 million bond for former President Donald Trump. This move comes as Trump appeals a $460 million judgment against him in a civil fraud case. The attorney general’s office has raised concerns about the financial stability of Knight Specialty Insurance company, the bondholder, and the collateral securing the bond.
According to the attorney general, Trump’s claimed collateral of $175 million in cash held in the DJT Revocable Trust is not under Knight’s control as required. Trump’s access to the funds could allow him to make withdrawals or replace the funds with assets that may fluctuate in value, potentially putting the bond at risk if the value drops below $175 million.
The state’s concern is that Trump could benefit from the bond deal by earning interest that exceeds the fees owed to Knight for posting the bond. If Trump loses the appeal and fails to pay, Knight would be responsible for the $175 million bond. However, the attorney general’s memorandum argues that Knight does not meet certain requirements for a surety bondholder under New York law.
Knight allegedly exceeds the restriction on risking more than 10% of its capital, as it has a surplus of only $138 million. Under New York law, with that surplus, the company may not take on liabilities exceeding $13.8 million. Additionally, the attorney general has criticized Knight’s risk transfer practices, which artificially inflate its surplus, and questioned the trustworthiness of its management.
Representatives for Trump have not responded to requests for comment on the matter. The state has asked the court to compel Trump to provide a replacement for the collateral within seven days of the ruling on the issue, with a hearing scheduled for Monday to address this request.