Donald Trump has posted a reduced-rate US$175 million civil fraud bond that his lawyers maintain will secure potential damages should the former US president lose his appeal challenging a judge's finding that he lied about his wealth as he grew the real estate empire.

But the bond is unconventional and is not backed by an irrevocable letter of credit (L/C), which has led to questions about whether it is under the control of the insurer, Knight Speciality, or whether it remains under the control of Trump himself.

A New York judge will decide on 22 April whether the bond is acceptable.

Trump's arrangements

An insurer would normally require unfettered access to cash to guarantee the bonds would be repaid if Trump loses his appeals. The former president's lawyers say the US$175 million bond is collateralised by more than US$175 million of cash held in a Charles Schwab account pledged to Knight Speciality.

But court papers filed by Trump's lawyers say the insurer is only able to gain control of the account by giving two days notice, suggesting that Trump, and not the bank or the bond underwriters, is actually in control of the cash.

If the bond were secured by an irrevocable L/C as is routinely the situation in an appeal bond of this type, the money required to pay fines should Trump lose his appeal would necessarily be committed to the bond.

Additional questions

Questions have also been raised about the insurer of Trump's bonds. Knight Speciality is run by billionaire Trump supporter Don Hankey, an American billionaire and founder of the Hankey Group, which makes most of its income from high interest car loans. He has been called "the repo man" and "king of the subprime car loan".

Trump's lawyers however say Knight Security is "a respected, well-capitalised, Delaware-domiciled insurer that has long underwritten surety bonds and other types of insurance placed around the country."

In late March, a state appeals court ruled that Trump and his co-defendants in the New York civil fraud case could post a US$175 million bond, reduced from US$460 million.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.