NY Appeals Court Overturns Trump’s $500M Civil Fraud Penalty
President Donald Trump secured a major legal victory Thursday as a New York appeals court tossed the massive civil fraud penalty that had ballooned to over $500 million.
The Appellate Division, First Department, struck down the $464 million judgment — plus interest — handed down earlier this year, ruling it violated the Eighth Amendment’s protection against excessive fines. The fine stemmed from a civil fraud case brought by New York Attorney General Letitia James, who accused Trump of inflating his net worth over a decade to secure favorable financial terms.
While the panel unanimously agreed the penalty was excessive, the ruling still leaves parts of the case intact. Trump and his sons Donald Jr. and Eric remain barred from running a New York-based company for several years, and a court-appointed monitor will continue to oversee the Trump Organization’s operations for three more years. Trump had previously posted a $175 million bond to delay enforcement of the judgment.
In a joint opinion, Judges Dianne T. Renwick and Peter H. Moulton wrote that although the injunctive relief was appropriate, “the court’s disgorgement order… is an excessive fine that violates the Eighth Amendment.” The full decision spanned 323 pages and included concurring and dissenting opinions from the five-judge panel, indicating a lack of full consensus — opening the door for the case to proceed to New York’s highest court.
The original ruling by Manhattan Supreme Court Justice Arthur Engoron in February had pegged the total liability at over $527 million for Trump, his sons, and other Trump Organization executives. But the appeals court’s decision undercuts James’ effort to financially cripple the Trump business empire.
Trump blasted the case as politically motivated and celebrated the ruling on Truth Social. “TOTAL VICTORY in the FAKE New York State Attorney General Letitia James Case!” he wrote. “I greatly respect the fact that the Court had the Courage to throw out this unlawful and disgraceful Decision.”
Judge Peter Moulton criticized the unprecedented size of the penalty and questioned whether the statute used by James — which doesn’t require proof of harm — had been stretched beyond its intent. “The law has morphed into something it was not meant to do,” Moulton noted in arguments leading up to the decision.
Letitia James, in her own statement, attempted to claim partial victory by highlighting that the court upheld the fraud finding. “Donald Trump, his company, and two of his children are liable for fraud,” she said. Her office has signaled plans to appeal the overturned judgment.
The case originally stemmed from allegations that Trump exaggerated the value of marquee properties like Trump Tower and Mar-a-Lago. Evidence presented at trial showed that Trump’s team claimed his penthouse was nearly triple its actual size and valued it at $327 million in 2015 — far beyond typical market value.
Similarly, Trump claimed Mar-a-Lago was worth $517 million on financial statements, while a tax filing valued it at just $27 million. His team defended the lower figure by labeling the estate a “social club,” a classification that netted Trump substantial tax breaks. Trump later testified that he believed the estate was worth as much as $1.5 billion.
Justice Engoron had labeled the conduct “staggering fraud” and insisted that even if banks weren’t harmed, future lenders could be. Trump’s lawyers countered that no parties were defrauded and that sophisticated banks like Deutsche Bank did their own due diligence.
The political overtones of the case were impossible to ignore. Both Engoron and James are elected Democrats, and James made her intentions clear on the campaign trail by promising to investigate Trump, calling him a “con man” and “carnival barker.”
Trump’s political team fired back after the appeals court decision. Ed Martin, director of the Justice Department’s Weaponization Working Group, called for James to resign. Martin has also launched a probe into James’ personal real estate dealings, including properties in Brooklyn and Virginia.
The 11-week trial had threatened to deal a devastating blow to Trump’s brand as he campaigns to return to the White House. Instead, Thursday’s ruling marks a significant win for the former president, one that will resonate throughout his ongoing legal battles and his political comeback effort.