Appeals court throws out massive civil fraud penalty against President
Donald Trump
[August 22, 2025]
By JENNIFER PELTZ and MICHAEL R. SISAK
NEW YORK (AP) — A New York appeals court on Thursday threw out President
Donald Trump’s massive financial penalty while narrowly upholding a
judge’s finding that he engaged in fraud by exaggerating his wealth for
decades. The ruling spares Trump from a potential half-billion-dollar
fine but bans him and his two eldest sons from serving in corporate
leadership for a few years.
Trump claimed “TOTAL VICTORY" in the case, which stemmed from a civil
lawsuit brought by New York Attorney General Letitia James.
“They stole $550 million from me with a fake case and it was
overturned," Trump said, echoing his earlier social media post as he
addressed police in Washington, D.C. “They said this was a fake case. It
was a terrible thing.”
James, a Democrat, focused on the parts of the decision that went her
way, saying in a statement that it “affirmed the well-supported finding
of the trial court: Donald Trump, his company, and two of his children
are liable for fraud.”
The ruling came seven months after Trump returned to the White House,
his political fortunes unimpeded by the civil fraud judgment, a criminal
conviction and other legal blows. A sharply divided panel of five judges
in the state’s mid-level Appellate Division couldn't agree on many
issues raised in Trump's appeal, but a majority said the monetary
penalty was “excessive.”
A lower-court judge, Arthur Engoron, had ordered Trump last year to pay
$355 million in penalties after finding that he flagrantly padded
financial statements provided to lenders and insurers. With interest,
the sum has topped $515 million. Additional penalties for executives at
his company, the Trump Organization, including sons Eric and Donald
Trump Jr., have brought the total to $527 million with interest.
An ‘excessive’ fine
“While harm certainly occurred, it was not the cataclysmic harm that can
justify a nearly half billion-dollar award” to the state, Judges Dianne
Renwick and Peter Moulton wrote in one of three opinions shaping the
appeals court’s ruling. They called the penalty “an excessive fine that
violates the Eighth Amendment of the United States Constitution.” Both
were appointed by Democratic governors.
Engoron’s other punishments, upheld by the appeals court, have been on
pause during Trump’s appeal, and the president was able to hold off
collection of the money by posting a $175 million bond.
Donald Trump Jr. celebrated the decision by mocking James, who had
periodically posted a running tally of the fraud penalty, with interest.
Over a post from James in February 2024, when the tally was nearly $465
million, Trump Jr. wrote: “I believe you mean $0.00. Thank you for your
attention to this matter.”
The five-judge panel, which split on the merits of the lawsuit and
Engoron’s fraud finding, dismissed the monetary penalty in its entirety
while also leaving a pathway for an appeal to the state’s highest court,
the Court of Appeals. In the meantime, Trump and his co-defendants, the
judges wrote, can seek to extend the pause to prevent any punishments
from taking effect.
While the Appellate Division dispatches most appeals in a few pages in a
matter of weeks, the judges weighing Trump’s case took nearly 11 months
to rule after oral arguments last fall and issued 323 pages of
concurring and dissenting opinions with no majority. Rather, some judges
endorsed parts of their colleagues’ findings while denouncing others,
enabling the court to rule.
Two judges wrote that they felt James’ lawsuit was justifiable and that
she had proven her case but the penalty was too severe. One wrote that
James exceeded her legal authority in bringing the suit, saying that if
any lenders felt cheated, they could have sued Trump themselves, and
none did. Another wrote that Engoron erred by ruling before the trial
that James had proven Trump engaged in fraud.
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Former President Donald Trump attends the closing arguments in the
Trump Organization civil fraud trial at New York State Supreme Court
in the Manhattan borough of New York, Jan. 11, 2024. (Shannon
Stapleton/Pool Photo via AP, File)
In his portion of the ruling, Judge David Friedman, appointed by a
Republican governor, was scathing in his criticism of James for
bringing the lawsuit.
“Plainly, her ultimate goal was not ‘market hygiene' ... but
political hygiene, ending with the derailment of President Trump’s
political career and the destruction of his real estate business,"
Friedman wrote. "The voters have obviously rendered a verdict on his
political career. This bench today unanimously derails the effort to
destroy his business.”
Claims of politics at play
Trump and his co-defendants denied wrongdoing. At the conclusion of
the civil trial in January 2024, Trump said he was “an innocent man”
and the case was a “fraud on me.” The Republican has repeatedly
maintained the case and the verdict were political moves by James
and Engoron, both Democrats.
Trump’s Justice Department has subpoenaed James for records related
to the lawsuit, among other documents, as part of an investigation
into whether she violated the president’s civil rights. James’
personal attorney Abbe D. Lowell has said investigating the fraud
case is “the most blatant and desperate example of this
administration carrying out the president’s political retribution
campaign.”
Trump and his lawyers said his financial statements weren’t
deceptive, since they came with disclaimers noting they weren’t
audited. The defense also noted bankers and insurers independently
evaluated the numbers, and the loans were repaid.
Despite such discrepancies as tripling the size of his Trump Tower
penthouse, he said the financial statements were, if anything,
lowball estimates of his fortune.
During an appellate court hearing last September, Trump’s lawyers
argued that many of the case’s allegations were too old and that
James had misused a consumer protection law to sue Trump over
private business transactions that were satisfactory to those
involved.
State attorneys said that while Trump insists no one was harmed by
the financial statements, his exaggerations led lenders to make
riskier loans and that honest borrowers lose out when others game
their net worth numbers.
Legal obstacles
The civil fraud case was just one of several legal obstacles for
Trump as he campaigned, won and segued to a second term as
president.
On Jan. 10, he was sentenced in his criminal hush money case to
what’s known as an unconditional discharge, leaving his conviction
on the books but sparing him jail, probation, a fine or other
punishment. He is appealing the conviction.
And in December, a federal appeals court upheld a jury’s finding
that Trump sexually abused writer E. Jean Carroll in the mid-1990s
and later defamed her, affirming a $5 million judgment against him.
The appeals court declined in June to reconsider. Trump still can
try to get the Supreme Court to hear his appeal.
Trump also is appealing a subsequent verdict that requires him to
pay Carroll $83.3 million for additional defamation claims.
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Associated Press reporter Larry Neumeister contributed to this
report.
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