New York state's attorney general Letitia James on Wednesday filed a civil suit against Donald Trump and his family for overstating asset valuations and deflating his net worth by billions for tax and insurance benefits.

James told journalists her office is seeking that the former president pay US$250 million in penalties, as well as banning his family "from running NY business for good" and barring him and his company from purchasing property in the state for five years.

She also said her office was making a criminal referral to the US Justice Department.

A Trump spokeswoman denounced the lawsuit as a political move by a Democratic official.

"A tale of two justice systems -- yes where criminals go free, and the Democrats only go after their political opponents!" Liz Harrington wrote on Trump's online platform Truth Social.

Separately, Trump blasted the lawsuit as "another witch hunt" and called the New York attorney general Letitia James, who is Black, a "racist."

"Another Witch Hunt by a racist Attorney General, Letitia James, who failed in her run for Governor, getting almost zero support from the public," Trump said, also on his Truth Social site. (AFP)