Nearly $80.5 million vanished from a New York City bank account overnight, a startling discovery made by the city’s accountants last week. This incident, however, did not emerge from a fictional scenario but was a consequence of the Trump administration’s sudden withdrawal of federal funds that were allocated during the Biden administration to assist the city in sheltering migrants.
On Friday, New York City filed a lawsuit against the Trump administration, seeking to retrieve the funds. The city accused the Trump administration of conducting an unlawful “money grab” of funds that were congressionally appropriated and allocated by the Federal Emergency Management Agency (FEMA).
The legal action, initiated in Manhattan federal court, stated that this withdrawal occurred “without notice or process of any kind,” which the city deemed “simply put, lawless.” The lawsuit intensified the ongoing conflict between New York City and the Trump administration, following a social media post by Elon Musk that reignited discussions about funding shelters for migrants. This suit also marked the first legal confrontation between the city and President Donald Trump as he aimed to bypass Congress to restrict and reclaim funds from federal programs he opposed.
In taking a legal stance, Mayor Eric Adams, a Democrat, appeared to counter concerns about his willingness to oppose Trump. Allegations had surfaced suggesting that Mayor Adams had made a corrupt agreement to assist the Trump administration in exchange for the dismissal of federal corruption charges against him. In a statement issued on Friday, Adams emphasized the importance of recouping the $80 million that FEMA initially approved, paid, and subsequently rescinded. He highlighted that the city had already spent over $7 billion in the last three years on migrant-associated costs and expressed determination to secure every dollar owed to the city’s residents.
City officials provided some answers to the question troubling city officials and localities nationwide: How did the federal government manage to withdraw millions of dollars from a city bank account? The explanation appeared straightforward.
FEMA employed the Automated Clearing House (ACH) to transfer approximately $80.5 million to a Citibank account held by the city. ACH is a widely used payment system facilitating electronic transfers between banks. Under certain conditions, such as correcting an incorrect payment or reversing a duplicate transaction, senders can rescind a payment through an ACH reversal within a short timeframe.
City officials reported that on February 11—following Musk’s social media post and about a week after FEMA’s transfer—the federal government executed ACH reversals totaling nearly $80.5 million without prior notice to the city. It remains unclear if the federal government adhered to proper procedures for these reversals, and a judge might eventually determine their legality.
A spokesperson for the Department of Homeland Security, which was named in the lawsuit and supervises FEMA, did not immediately comment on the situation.
This incident illustrated a tool used by the Trump administration to rescind funds, raising concerns among experts and local officials about the potential misuse of payment systems to influence funding allocations based on political objectives.
On Wednesday, Brad Lander, the city comptroller, addressed a letter to the city’s Finance Department, inquiring what precautions had been taken to prevent future unilateral withdrawals by the federal government from city accounts.
He stated, “This withdrawal is part of an escalating series of actions by Musk and the Department of Government Efficiency (DOGE) to wield government payments to support unchecked federal executive power, in violation of the law,” referencing a federal cost-cutting initiative led by Musk.
The situation traces back to 2022, when Mayor Adams sought financial support from Washington to address the costs of accommodating a growing number of migrants arriving in the city from the U.S. southern border.
During President Joe Biden’s administration, Congress allocated $237 million to New York City, a fraction compared to the over $7 billion reportedly spent by the city on the migrant crisis. The funding was primarily distributed through FEMA’s Shelter and Services Program, designed by Congress to reimburse localities and organizations aiding recent border crossers. Recipients included cities, counties, and various organizations across the country.
New York City applied for and received funds last year to cover incurred expenses, such as payments for hotel conversions into shelters, as well as food and security. On February 4, weeks after Trump’s inauguration, FEMA deposited approximately $80.5 million into a city-owned Citibank account.
Elon Musk then directed attention to this transfer through a post on his social media platform X, alleging it violated a Trump executive order without specifying the legislation or order. He contended the funds were earmarked for disaster relief, although shelter reimbursements derived from a distinct funding source.
The developments, paralleling Trump’s second term, unfolded rapidly. Musk’s post incited conservative outrage regarding the use of taxpayer money on migrants. The Trump administration subsequently dismissed four FEMA officials, including the chief financial officer, the day after the transfer. On February 12, the city’s accountants discovered the disappearance of the funds during their morning review of the ledgers.
Kristi Noem, the Homeland Security Secretary, promptly took responsibility, stating she had “clawed back the full payment that FEMA deep state activists unilaterally gave to NYC migrant hotels.”
The lawsuit argued the federal government attempted to retroactively justify its actions. On February 19, more than a week after the clawback, FEMA acting director Cameron Hamilton sent the city a letter threatening to withhold over $188 million awarded to the city, including the previously seized funds.
Hamilton cited concerns about SSP funding potentially reaching entities involved in illegal activities, referencing a New York Post story alleging a Venezuelan gang’s takeover of the Roosevelt Hotel, a principal migrant shelter in the city—a claim disputed by New York City officials. The letter insinuated the city’s potential involvement in supporting individuals lacking permanent legal status and promoting illegal immigration.
City attorneys contended the letter served as a “cover” for the Trump administration’s “real intent” to withhold the funds due to opposition to their designated purposes. The lawsuit demanded the return of the almost $80.5 million and requested the court preclude further federal withdrawals from city accounts.