Donald Trump May Be Closer To Bankruptcy Than It Seems

Donald Trump may be in a worse financial situation than most people think, a financial analyst has said.

Jon Gabrielsen, an Atlanta-based market economist, told Newsweek that Trump’s liquidity problems may be more acute than they first appear, as businesses need extra cash in reserve to avoid bankruptcy.

He said Trump was “​​screwed, blued, and tattooed” unless he can come up with more cash to pay his court awards.

Gabrielsen said many journalists are erroneously comparing Trump’s stated cash balances with the amount he has to pay from recent fraud and defamation cases, which is currently estimated at over $542 million, excluding legal costs.

Gabrielsen said a company is not legally permitted to simply use up all its cash reserves to pay for a lawsuit, and must keep a float for expenses.

“You are not bankrupt when your balance hits zero, you are bankrupt when your balance falls below the amount of float you need in order to continue as a going concern.”

He said Trump’s total company balances are at, or less than, the fines, without even considering the necessary float Trump needs to keep the companies alive.

“A company cannot pay out down to a balance of zero and continue as a going concern. It has a large daily cash drain to pay ongoing expenses requiring some amount of ‘float’ or minimum balance to be maintained,” he said.

Gabrielsen said the float depends upon the size of the company and the nature of the industry.

Trump recently paid a bond worth more than $92 million for an appeal in a defamation case in which a jury awarded a retired journalist E. Jean Carroll $83.3 million after Trump repeatedly denied that he had sexually assaulted her.

The combined $88.3 million that Trump has to pay in the two E. Jean Carroll cases, plus the $454 million he has to pay in a New York fraud trial, amount to $542.3 million.

On February 28, Judge Anil Singh rejected Trump’s $100 million bond offer in the New York fraud judgment and ordered that the former president pay the full penalty or cash bond amount by the original deadline. The Republican has to pay the full $454 million fraud judgment by March 25 to begin the appeal process. Newsweek contacted Trump’s legal team for comment via email on Friday. He remains the frontrunner for the Republican nomination in the 2024 presidential election.

If he can’t, Trump must pay the full amount of the judgment or face asset seizure by New York Attorney General Letitia James. She has already said that she will seize Trump assets if he doesn’t pay. In a filing to Singh on February 28, James wrote that Trump has essentially conceded that he “has insufficient liquid assets” to honor the fine.

James filed a lawsuit in September 2022 accusing the former president, his two adult sons Donald Jr. and Eric, the Trump Organization, and two company executives, Allen Weisselberg and Jeff McConney, of fraudulently overvaluing assets to secure more favorable bank loans and tax deals. The other defendants in the case have received financial penalties and are banned from doing business in New York for a period.

Greg Germain, a law professor at Syracuse University in New York, told Newsweek that, if Trump doesn’t get a stay on the order to pay the full $454 million, “he’s in a very tough spot.” He said James can begin enforcement proceedings, “both against the New York assets, as well as assets in other states if she wants to.”

“Aggressive enforcement could wreak havoc on his businesses. The usual course is bankruptcy to protect his assets and businesses,” Germain said.

Singh did provide Trump some relief by accepting the request to pause the three-year ban Engoron issued that prohibited the former president from pursuing loans from banks in New York, potentially providing Trump with a way to secure the money for the bond.

On February 16, New York Judge Arthur Engoron ordered that Trump pay a $355 million fine, increasing to $454 million with interest. He ruled that the former president filed fraudulent financial statements that inflated the value of his properties and assets for years.

Trump’s lawyers wrote in a submission to Singh that “the exorbitant and punitive amount of the Judgment coupled with an unlawful and unconstitutional blanket prohibition on lending transactions would make it impossible to secure and post a complete bond.”

“In the absence of a stay on the terms herein outlined, properties would likely need to be sold to raise capital under exigent circumstances, and there would be no way to recover any property sold following a successful appeal and no means to recover the resulting financial losses from the Attorney General,” Trump’s legal team added.