New York Attorney General Letitia James took action on Friday by filing a memorandum of opposition against the surety company that holds the $175 million bond for former President Donald Trump as he challenges the $460 million decision against him in the civil fraud trial earlier this year.
Expressing concerns about the financial stability of the bondholder, Knight Specialty Insurance Company, the attorney general's office highlighted issues regarding the collateral for the bond.
The attorney general's office argued that the $175 million in cash Trump claims to have provided as collateral, held in the DJT Revocable Trust, is not under Knight's control as required. This lack of control means that Trump still has access to the funds, allowing him to make withdrawals or substitute the funds with other assets subject to market fluctuations. If the value of the collateral drops below $175 million, the bond would no longer be adequately secured, according to the attorney general.
There are concerns that if Trump retains control over the account, he could potentially profit from the bond arrangement by earning interest that surpasses the fees he owes to Knight for issuing the bond.
Should Trump lose on appeal, and if he doesn't pay, Knight would be obligated to pay the $175 million bond. The attorney general's memorandum argued that Knight falls short on several requirements for a surety bondholder.
As reported by CBS News, Knight doesn't seem to meet a restriction under New York insurance law prohibiting companies from risking more than 10% of their capital. The attorney general's office pointed out that Knight only has a surplus of $138 million. According to New York law, with that surplus amount, Knight may not assume liability exceeding $13.8 million. The attorney general also raised concerns about Knight's reliance on risk transfer practices that artificially inflate its surplus. James also alleges that Knight's management has been untrustworthy, violating federal law "on multiple occasions over the last several years.
Representatives for Trump have not responded to requests for comment.
The state has requested the court to compel Trump to find a replacement within seven days of the ruling. A hearing on this matter is set for Monday.
