Trump’s $175m fraud bond thrown into doubt as New York attorney general questions insurer

Letitia James filed a ‘notice of exception to the sufficiency of the surety’ seeking more information about Knight Specialty Insurance Company

Donald Trump’s $175m bond in his New York civil fraud case has been thrown into doubt by New York Attorney General Letitia James after she filed a notice asking for evidence that the out-of-state firm that underwrote it really has the money to pay up.

Ms James’s office submitted a “notice of exception to the sufficiency of the surety” on Thursday asking for further proof that California-based Knight Specialty Insurance Company (KSIC) has the capital to proceed on the former president’s behalf.

KSIC is not regulated by New York state, which means that it is not authorised to issue surety bonds in the Empire State and therefore cannot obtain a certificate from the New York Department of Financial Services, which is customarily part of any bond package.

“Defendants or KSIC shall file a motion to justify the surety within 10 days of the service of this notice, failing which the bond shall be without effect, except that the surety shall remain liable on the bond until a new undertaking is given and allowed,” the notice read.

Judge Arthur Engoron – who presided over the original three-month trial that ended on 16 February with Mr Trump and his fellow Trump Organization executives being found liable for illegally inflating the value of company assets to obtain favourable terms from lenders – has already moved to schedule a hearing on the matter for 22 April.

Mr Trump finally placed the bond on Easter Monday after a panel of New York appeals court justices granted him a 10-day extension on the original 25 March deadline and ruled that he need only pay $175m – a portion of the full $464m bond representing the value of the entire judgement against him.

KSIC is owned by Republican billionaire Don Hankey – a man dubbed “the king of the subprime auto loan” whose Axos Bank has previously helped refinance loans on several of Mr Trump’s luxury properties.

Mr Hankey said on Tuesday that his client had provided the full $175m in cash as collateral for the bond.

Earlier on Thursday, key paperwork from the bond filing was rejected and “returned for correction” to Mr Trump’s legal team before being swiftly refiled with the requested financial statement from KSIC and two other missing details.

The additional documents suggest KSIC held total assets of $539m at the end of 2023 and $13m in surplus to policyholders while its parent company’s total assets stood at $2.2bn with $1m in surplus.

New York Attorney General Letitia James (AP)

Bruce Lederman, an attorney with DL Partners, told CNN on Thursday it was understandable that Ms James should wish to know more about the underwriter’s capabilities and pointed out that Mr Trump can ask Judge Engoron to sign off on KSIC.

“If they seek court approval of Knight Specialty, I believe that the attorney general will want proof that the company is actually holding the $175m in cash collateral so the bond can be immediately paid if the judgement is affirmed without needing to wait to try to liquidate pledged assets,” he said.

However, Mr Trump’s attorney Chris Kise responded to the the attorney general’s questioning of KSIC by accusing her of engaging in a “baseless public quarrel”.

“After hiding out in silence following an embarrassing loss in the First Department, which does not bode well for the future of her baseless and vindictive political crusade, the attorney general now seeks to stir up some equally baseless public quarrel in a desperate effort to regain relevance,” he said.

Separately, Ms James’s office also approached Judge Engoron on Thursday requesting that the independent monitor appointed to oversee the Trump Organization’s affairs also investigate whether the defence “withheld relevant and responsive information” during the trial, citing the company’s former CFO Allen Weisselberg pleading guilty to perjury charges last month.

By paying the bond on Monday, Mr Trump ensured that Ms James was prevented, for now, from repossessing some of the key assets in his hometown real estate empire like Trump Tower and 40 Wall Street.

The Republican presidential candidate is appealing the case and could yet be forced to pay the $464m judgement in full should he lose.