New York State Attorney General Letitia James

New York State Attorney General Letitia James accused New York City of an $810 million fraud scheme involving taxi medallions Thursday, arguing that city officials artificially inflated medallion prices before auctioning them off.

In a notice of claim addressed to New York City Comptroller Scott Stringer, James said the city's Taxi and Limousine Commission concealed internal analysis showing that the price of taxi medallions had outstripped their value, among other offenses.

"These taxi medallions were marketed as a pathway to the American Dream, but instead became a trapdoor of despair for medallion owners harmed by the TLCs unlawful practices," James said in a statement.

"The very government that was supposed to ensure fair practices in the marketplace engaged in a scheme that defrauded hundreds of medallion owners, leaving many with no choice but to work day and night to pay off their overpriced medallions."

The price of an individual medallion sold at auction increased from $283,300 in 2004 to $965,000 in 2014, James said. She accused the TLC of publishing inflated medallion prices despite having "exclusive oversight and approval" over medallion sales.

James said the scheme lasted from at least 2004 to 2017. In a statement, New York Taxi Workers Alliance executive director Bhairavi Desai attributed the damage to former Mayor Michael Bloomberg. James didn't mention Bloomberg by name.

Staff for Bloomberg did not immediately return a message seeking comment.

"The city, along with others, first inflated the value of yellow taxi medallions so they could raise funds on the backs of immigrant workers desperate for a way out of the low-wage economy and into the middle class …Thousands of drivers embroiled in $600,000 to even $1 million loans were pushed into poverty, often earning less than minimum wage," Desai said.

Desai added that the attorney general's suit is "long overdue" and a first step toward restitution for drivers.

Freddi Goldstein, a spokeswoman for New York City Mayor Bill de Blasio, said in a statement that the de Blasio administration has worked hard to help drivers since he took office in 2014.

"We have spent the last six years putting money back into the pockets of drivers and attempting to curb the harm from Uber years before anyone else wanted to recognize the threat," Goldstein said.

"This crisis has been ours to solve—working tirelessly to clean up the carelessness and greed of others. If the attorney general wants to launch a frivolous investigation into the very administration that has done nothing but work to improve the situation, this is what she'll find."