The attorney general of New York state has filed a civil fraud lawsuit against Donald Trump and three of his children involved in the family real-estate business, for falsely inflating his net worth by billions in order to enrich himself and secure favorable loans.

Announcing the suit in New York on Wednesday, Letitia James also said referrals had been made to federal prosecutors and the Internal Revenue Service – a move sure to anger the former US president and increase consternation among his inner circle about the depth of his legal predicament.

Trump, Donald Trump Jr, Ivanka Trump and Eric Trump were all deposed during the New York investigation, which began when Trump was president and lasted for three years.

The lawsuit seeks to bar all four Trumps from serving as executives in New York, and to prohibit the Trump Organization from acquiring any commercial real estate or receiving loans from New York-based entities for five years.

James added: “The complaint demonstrates that Donald Trump falsely inflated his net worth by billions of dollars to unjustly enrich himself and to cheat the system, thereby cheating all of us. He did this with the help of the other defendants.”

James said her office uncovered evidence of federal criminal violations including issuing false statements to financial institutions and bank fraud, and had referred the matter to the southern district of New York and the IRS.

The lawsuit states: “The number of grossly inflated asset values is staggering, affecting most if not all of the real estate holdings in any given year.”

The suit also seeks to recover at least $250m and to bar the Trump Organization chief financial officer, Allen Weisselberg, and comptroller, Jeffrey McConney, from serving in top roles of any company in New York.

In a separate criminal investigation, in New York, Weisselberg, 75, has pleaded guilty to tax fraud.

Noting how Trump and Weisselberg cited fifth-amendment protections against self-incrimination when refusing to answer questions at deposition, James said: “For too long, powerful, wealthy people in this country have operated as if the rules do not apply to them.

“Donald Trump stands out as among the most egregious examples. Trump thought he could get away with the art of the steal but today that conduct ends.”

Though the New York suit is not a criminal prosecution, James’s referral to federal prosecutors at the southern district of New York threatens further serious legal peril for the former president and his three adult children.

Trump has repeatedly suggested he will run again for president in 2024. But he faces legal threats including possible indictment over his retention of classified records and multiple investigations of his attempts to overturn the 2020 election.

The former president and his attorneys have castigated the New York investigation as a politically motivated “witch-hunt” – his default position under scrutiny – and insisted that the Trump Organization did not operate illegally.

But in the 214-page complaint, James outlined an extensive record of alleged wrongdoing, such as fraudulently inflating the value of 23 properties including the Mar-a-Lago resort in Florida, Trump Tower in New York and what was previously the Trump International hotel in Washington DC.

James alleged that the defendants made more than 200 false and misleading asset valuations in financial statements between 2011 and 2021, and revealed strategies she said Trump and his organization used to commit fraud.

Mar-a-Lago, the suit says, was valued as high as $739m when it should have been closer to $75m.

James also said the Trumps “received a series of bank ordered appraisals for the commercial property at 40 Wall Street in New York City that calculated the value of the property at $200m as of August 2010 and $220m as of November 2012.

“Yet in his 2011 statement, Mr Trump listed 40 Wall Street with a value of $524m, which increased to $530m over the next two years, more than twice the value calculated by the professionals.

“Even more egregious, the $500m-plus valuation was attributed to information from the appraiser who valued the building at just over $200m.”

Regarding Trump Tower, on Fifth Avenue in Manhattan, James said: “Mr Trump represented that his apartment spanned more than 30,000 sq ft, which was the basis for valuing the apartment. In reality, the apartment had an area of less than 11,000 sq ft, something Mr Trump was well aware of.

“Based on that inflated square footage, the value of the apartment in 2015 and 2016 was $327m. To this date, no apartment in New York City has ever sold for close to that amount. Tripling the size of the apartment for purposes of the valuation was intentional and deliberate fraud. Not an honest mistake.”

Trump has consistently accused James of being politically motivated. Before James’s announcement, Bloomberg News reported that “members of Trump’s inner circle” saw the suit as “a fundraising opportunity for James, a Democrat facing re-election in November”.

Trump has also claimed that the attorney general, who is Black, is racist.

As James spoke, Donald Trump Jr tweeted: “The bullshit Dem[ocratic] witch-hunt continues!”

Trump lawyer Alina Habba said the lawsuit “is neither focused on the facts nor the law, rather it is solely focused on advancing the attorney general’s political agenda,” accusing James of abusing her authority “by prying into transactions where absolutely no wrongdoing has taken place”.

Habba said the allegations in the lawsuit are “meritless”.

Summing up on Wednesday morning, James said: “I want to be clear. White-collar financial crime is not a victimless crime.”

Repeating her allusion to Trump’s most famous ghosted book, she added: “Claiming you have money that you do not have does not amount to the art of the deal. It’s the art of the steal.

“There cannot be different rules for different people in this country or in this state … No one is above the law.”

• The Associated Press contributed reporting