In a dramatic turn for one of the most closely watched legal battles in recent American history, a New York appeals court has thrown out the nearly half-billion-dollar civil fraud judgment against former President Donald Trump, his family, and his company. The August 21, 2025, decision from the Appellate Division, First Department, marks a pivotal moment in the years-long saga over Trump’s business practices, sparking fierce reactions across the political spectrum and setting the stage for a likely showdown in New York’s highest court.
The 323-page opinion was unanimous in overturning the $454 million penalty (which had ballooned to over $500 million with interest), originally imposed by Manhattan Supreme Court Justice Arthur Engoron in February 2024. The court’s ruling, however, was anything but simple. According to ABC News, two of the five judges agreed that Trump was properly held liable for business fraud but found the fine “excessive.” Two others believed the fraud finding itself was flawed and argued the case should be retried, though they reluctantly joined the majority to allow the case to proceed on appeal. The fifth judge went even further, contending that New York Attorney General Letitia James should never have brought the case at all.
“While harm certainly occurred, it was not the cataclysmic harm that can justify a nearly half billion-dollar award to the State,” the court wrote, echoing concerns raised during the September 2025 appellate hearing about the size and scope of the judgment. Three of the judges specifically called the fine “an excessive fine that violates the Eighth Amendment of the United States Constitution,” as reported by the New York Post.
Despite tossing out the massive financial penalty, the panel upheld other significant restrictions from the original ruling. Trump and his two eldest sons, Donald Trump Jr. and Eric Trump, remain barred from running a business in New York for several years. An outside monitor will continue to oversee the Trump Organization’s business dealings for three years, and these non-monetary sanctions may yet be put on hold pending further appeals.
The underlying case, brought by New York Attorney General Letitia James, accused Trump and his company of inflating his net worth by billions of dollars over a decade to secure better loan and insurance terms. Evidence presented at the 11-week trial included claims that Trump’s penthouse was listed as 30,000 square feet—nearly triple its actual size—and valued at $327 million in 2015, up from $80 million just four years earlier. Mar-a-Lago, Trump’s Florida estate, was valued at $517 million on financial filings, despite a tax broker listing its market value at only $27 million in 2020.
Judge Engoron’s February 2024 ruling was scathing. “The frauds found here leap off the page and shock the conscience,” he wrote, citing a “complete lack of contrition and remorse” from Trump and his co-defendants. He temporarily barred Trump and his sons from leading New York-based companies and ordered the payment of more than $454 million, a sum that rose to around half a billion dollars with interest.
Throughout the proceedings, Trump and his legal team maintained that the case was politically motivated. Trump himself declared during an impromptu closing statement, “I’ve been persecuted by someone running for office,” referring to James. He insisted he was an “innocent man,” arguing that sophisticated banks and insurers had willingly entered into deals with his company and were paid back in full. Trump’s lawyers contended that there were no actual victims and that the Attorney General had misapplied the law and exceeded the statute of limitations.
After the appellate court’s decision, Trump was quick to claim victory. “I had a victory today. You know, they stole $550 million from me with a fake case, and it was overturned,” he told law enforcement officers during a Washington, DC, visit on August 21, 2025. On Truth Social, he declared, “TOTAL VICTORY in the FAKE New York State Attorney General Letitia James Case! I greatly respect the fact that the Court had the Courage to throw out this unlawful and disgraceful Decision that was hurting Business all throughout New York State.”
Trump’s former personal attorney Alina Habba echoed the sentiment, calling the ruling “a resounding victory for President Trump and his company.” Another Trump attorney, Christopher Kise, insisted that Trump was “always worth even more than what was reflected in the financial statements,” and accused the Attorney General of disregarding established property valuation principles.
But for Letitia James, the fight is far from over. In a statement, she emphasized that the appeals court “affirmed the well-supported finding of the trial court: Donald Trump, his company, and two of his children are liable for fraud.” She vowed to appeal to the New York Court of Appeals, seeking to reinstate the financial penalty and “continue to protect the rights and interests of New Yorkers.”
The appellate panel’s decision was sharply divided on key issues. One judge, Justice David Friedman, argued that James lacked the authority to bring the case, suggesting that affected lenders could have sued Trump directly if they felt wronged. Friedman also criticized Engoron’s handling of the trial, particularly his decision to impose sanctions on Trump’s legal team. “The trial court’s objectivity and impartiality in presiding over and adjudicating this action” was called into question, he wrote.
The political undertones of the case have been impossible to ignore. Both Engoron and James are elected Democrats, and James campaigned on a promise to investigate Trump, calling him a “con man” and “carnival barker.” The case unfolded as Trump campaigned to regain the White House, forcing him to leave the campaign trail to attend the trial. Since his reelection in November 2024, Trump’s lawyers have urged James to drop the case, but her office has stood firm, arguing that civil litigation does not impede the president’s official duties.
Meanwhile, Trump’s legal troubles have been rapidly unraveling. According to the New York Post, federal cases related to the January 6 Capitol riot and classified documents at Mar-a-Lago were dropped after the Supreme Court granted broad immunity to presidents for actions taken in office. The Georgia election interference case was thrown into limbo after the district attorney was removed for misconduct. Trump’s only remaining criminal conviction stems from the New York “hush money” case, which he is appealing, though he received an unconditional discharge and faces no penalty.
Still, Trump owes more than $550 million across three civil judgments, including $83.3 million for defaming writer E. Jean Carroll and $5 million after a jury found he sexually abused Carroll in the 1990s. He continues to fight these verdicts in court, with the prospect of further appeals looming.
As the legal wrangling continues, the New York fraud case stands as a symbol of the deep political and legal divisions in the country. The appeals court’s decision has neither fully exonerated nor fully condemned Trump, leaving the final outcome to be decided by the state’s highest court. For now, both sides are claiming partial victories, and the nation watches as the next chapter in this extraordinary legal battle unfolds.
