New York Attorney General Letitia James has filed a memorandum of opposition against surety company Knight Specialty Insurance, which currently holds the $175 million bond for former President Donald Trump as he appeals a $460 million decision in a civil fraud trial. The attorney general's office has expressed concerns regarding the financials of the bondholder and the collateral for the bond.

According to the memorandum, the attorney general's office highlighted that the $175 million in cash claimed as collateral by Trump is held in the DJT Revocable Trust and is not under the control of Knight as it should be. This raises concerns regarding Trump's continued access to the funds, as he could make withdrawals or replace the collateral with assets that fluctuate with the markets. If the value of the collateral drops below $175 million, the bond would no longer be secured, according to the attorney general.

Furthermore, the state expressed worries that Trump's control over the account could result in him earning interest on the bond deal that exceeds the fees he owes to Knight for posting the bond. If Trump were to lose the appeal and fail to pay, Knight would be obligated to cover the $175 million bond.

The attorney general's memorandum argued that Knight Specialty Insurance falls short on various requirements for a surety bondholder. It stated that Knight seemingly violates a New York insurance law restriction preventing companies from risking more than 10% of their capital, as the attorney general's office noted that Knight only has a surplus of $138 million. According to New York law, with such a surplus, liability should not exceed $13.8 million. The attorney general also accused Knight of relying on risk transfer practices that artificially boost its surplus.

In addition, the attorney general has highlighted concerns about Knight's management, alleging that the company has violated federal law on multiple occasions in recent years.

The state is now calling on the court to require Trump to find a replacement for Knight within seven days of the court's ruling on the matter. A hearing on this issue is scheduled for Monday.

The outcome of this legal battle could have significant implications for both Trump and Knight Specialty Insurance, as the attorney general seeks to address potential risks and ensure proper compliance with relevant laws and regulations.