Donald Trump and his sons Eric and Don Jr. committed fraud by inflating the value of the real estate and financial assets of the Trump Organization for years, a New York judge ruled on Tuesday.

The ruling by Judge Arthur Engoron is a setback for the former president ahead of a trial in the civil case due to begin on Monday.

New York State Attorney General Letitia James has accused Trump and his two eldest sons of business fraud for allegedly submitting "grossly inflated" numbers to banks and insurers.

The lawsuit asserts that they lied to tax collectors, lenders, and insurers for years in a scheme that routinely misstated the value of the organization's properties to enrich themselves.

Trump's lawyers had asked the judge to throw out the case ahead of the trial by granting what is known as a summary judgment in his favor.

James had also asked for a summary judgment, however, asking that Trump be found liable ahead of the trial and the judge sided with the attorney general.

James is seeking $250 million in penalties and the removal of Trump and his sons from the management of the family real estate firm, the Trump Organization.

James claims that Trump and associates submitted "grossly inflated" numbers to banks and insurers each year between 2011 and 2021 "to secure and maintain loans and insurance on more favorable terms."

They allegedly fraudulently overvalued the net worth of Trump company assets by billions of dollars, resulting in "hundreds of millions of dollars in ill-gotten savings and profits."

James has alleged that the overvaluation of Trump's assets was between $1.9 billion and $3.6 billion per year.

Trump, the frontrunner for the 2024 Republican presidential nomination, has denounced the case as a "witch hunt," calling James, who is a Democrat and Black, "racist."

In January, the Trump Organization was fined $1.6 million by a New York judge in a criminal tax and financial fraud case.