Letitia James Presses Judge to Void Trump’s $175 Million Bond, Paving Way for Asset Seizure

New York Attorney General Letitia James speaks during a press conference at the Office of the Attorney General in New York on Feb. 16, 2024. Timothy A. Clary/AFP via Getty Images

New York Attorney General Letitia James has asked the judge in former President Donald Trump’s civil fraud case to declare the $175 million bond that a surety company posted on his behalf as “without effect” and to require it to post a new bond that is sufficiently collateralized, while calling into question the firm’s credibility.

The company that issued the bond—Knight Specialty Insurance Company (KSIC)—posted a $175 million bond on April 1 on behalf of President Trump, allowing him to fend off a possible seizure of his properties or other assets following a $464 million judgment (including interest) in a case that accused him of inflating asset values to get better loan terms.

Ms. James, a Democrat who brought the civil fraud case against President Trump, initially challenged the “sufficiency” of the $175 million bond in a court filing several days after KSIC posted it, leading the former president’s attorneys to insist in response that the company is well-capitalized and has enough collateral to back the bond.

But Ms. James has rejected that assertion, raising a number of arguments in opposition to KSIC’s claim in an April 19 court filing that asks the presiding judge, New York Supreme Court Justice Arthur Engoron, to declare the bond to be “without effect” and order a replacement bond to be posted within seven days.

KSIC did not immediately respond to a request for comment.

Justice Engoron has set an April 22 hearing to discuss the issue of the bond.

Bond Sufficiency Challenge

State law would have required President Trump to post the full judgment ($393 million disgorgement with 9 percent backdated interest for a total of $464 million) but an appeals court lowered it to $175 million, to be paid within 10 days.

KSIC posted the $175 million bond on behalf of President Trump on April 1, staying execution of judgment in the case and preventing any seizure of his assets as his appeal is heard in the case.

However, both the bond’s validity and the company’s credibility were immediately challenged by Ms. James. In an April 4 filing, she said she took “exception to the sufficiency of the surety,” justifying her opposition in part due to the fact that KISC was not an admitted carrier in New York and lacked a certificate of qualification required by New York Insurance Law Section 1111.

Ms. James gave President Trump’s counsel, or KSIC, ten days to file a motion to justify the surety, threatening that the bond would otherwise become ineffective, a move that would then open the door to a seizure of Trump properties to satisfy the judgment.

In response, President Trump’s lawyers filed a motion on April 15 asking the judge to dismiss Ms. James’s objections to the bond, while laying out a series of arguments why they believe the surety to be valid.

President Trump’s counsel pointed out that there’s no legal requirement for a surety company to be an “admitted carrier” in New York State to provide the bond.

They also argued that the company is well-capitalized, with over $539 million in assets, $138 million in equity—plus having access to over $2 billion in assets and $1 billion in equity.

Further, they said in the filing that President Trump’s agreement with KSIC and the Charles Schwab bank allows KSIC to activate control of a brokerage account at Schwab held by the Donald J. Trump Revocable Trust and containing just over $175 million within two business days, meaning that “the $175 million bond is fully collateralized by $175 million in cash.”

However, Ms. James rejected those arguments in her April 19 filing.

“Defendants and KSIC (collectively, ‘Movants’) have failed to justify KSIC as the surety on this extraordinarily large undertaking for a number of reasons,” she wrote.

Credibility in Question

The New York AG argued in the filing that KSIC and Trump’s counsel have failed to prove that the collateral backing the $175 bond is sufficiently secure and ascertainable.

She objected to the structure of the agreements governing how the collateral is pledged and controlled, arguing that the $175 million in the brokerage account held by the Donald J. Trump Revocable Trust at Schwab can easily be emptied unless KSIC objects within two days after receiving notice of the proposed transaction.

Also, while the agreement requires the Trust to top up the balance in the brokerage account if it dips below $175 million, Ms. James claimed that this promise is “hollow” if the Trust lacks the funds to do so and concedes that the value of the collateral will fluctuate based on market conditions.

“On the evidence submitted by Movants in support of the Motion, there is insufficient basis for the Court to find that the bond is sufficiently collateralized by identifiable assets,” she wrote.

Further, she said the court shouldn’t rely on KSIC’s financial summary attached to the bond as evidence that the company has sufficient capacity to justify writing the $175 million surety.

“That is because KSIC sends 100% of its retained insurance risk to affiliates in the Cayman Islands, where lax regulations allow KSIC to use this risk transfer to reduce the liabilities it carries on its books in a way that artificially bolsters its surplus—a practice New York regulators have dubbed ’shadow insurance' and about which they have sounded the alarm,” she wrote.

Finally, Ms. James said that even though it’s legal for a licensed excess lines broker to place business with an unauthorized insurer like KSIC, it can only do so if it is satisfied that the insurer’s management is “trustworthy and competent.”

“KSIC is not qualified to act as the surety under this standard because its management has been found by federal authorities to have operated affiliated companies within KSIC’s holding company structure in violation of federal law on multiple occasions within the past several years,” she argued in the filing.

She asked the judge to deny Trump counsel’s motion to dismiss her challenge and post a replacement bond within seven days.

While the Trump campaign did not respond to a request for comment on Ms. James’ bond challenge, Trump attorney Christopher Kise earlier denounced her actions as “another witch hunt.”

Mr. Kise suggested Ms. James had personal or political motives behind the move, and did it to “stir up some equally baseless public quarrel in a desperate effort to regain relevance.”

President Trump has vowed to fight the case all the way up to the U.S. Supreme Court if necessary.

He has pleaded not guilty in the case and has accused Ms. James of political motives.

Ms. James’ office did not respond to a request for comment on the bond challenge.