New York Attorney General Letitia James and former President Donald Trump are once again locked in a high-stakes legal battle after a New York appellate court threw out a staggering $500 million civil fraud penalty against Trump and his company, yet left the underlying fraud case intact. The ruling, handed down on August 21, 2025, by a divided five-judge panel, marks a dramatic twist in a saga that has gripped the nation’s political and legal circles for years—and it’s clear the fight is far from over.
The case, originally brought by James in 2022, accused Trump, his two eldest sons, and the Trump Organization of inflating property valuations to secure better loan terms and insurance benefits. After a three-month trial that ran from October 2023 to January 2024, Manhattan Supreme Court Justice Arthur Engoron found the defendants liable for fraud. The court ordered them to pay $454 million in penalties, a sum that ballooned to over $527 million with accumulating daily interest as appeals dragged on, according to calculations from the Associated Press and Business Insider.
But on Thursday, the appellate court struck down the penalty, calling it “unlawfully excessive.” The decision was anything but unanimous: the judges issued three separate opinions spanning more than 300 pages, and could only agree broadly that Trump and his company were indeed liable for financial fraud. The panel’s lack of consensus left many legal questions unresolved, including whether the Trump Organization should be liable for every count, whether Trump should get a new trial, and even whether James had the authority to bring the lawsuit in the first place.
“It almost looked to me like the Appellate Division was passing the buck to the Court of Appeals to make the final decision,” said Bennett Gershman, a law professor at Pace University and former New York prosecutor, in comments reported by The Hill. Indeed, two judges joined the majority decision “for the sole purpose of ensuring finality, thereby affording the parties a path for appeal” to New York’s highest court.
Letitia James, undeterred by the setback, immediately vowed to appeal the ruling to the state’s top court. She emphasized that it “should not be lost to history” that another court had found Trump violated the law and that her case has merit. “Her allegations have been tested at every stage of this maximalist litigation and for the most part have been upheld,” wrote Judges Peter Moulton and Dianne Renwick in their principal opinion. “We now have before us the evidence the Attorney General amassed and it demonstrates that defendants engaged in a decade-long pattern of financial fraud and illegality.”
Trump, on the other hand, wasted no time in declaring the outcome a personal triumph. In a Truth Social post, he called the decision a “TOTAL VICTORY,” adding, “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 legal team has long characterized James’s case as a “political crusade” and “lawfare campaign” against him, echoing the sentiments of Judge David Friedman, who in his opinion claimed James sought to use the law “for political ends,” referencing her 2018 campaign promises to investigate Trump.
But the majority opinion rejected this view, stating, “The ‘political’ choice would have been to not bring this case, thereby avoiding a fight with a powerful adversary.” The judges concluded that, while harm did occur, “it was not the cataclysmic harm that can justify a nearly half billion-dollar award to the State.”
The original lawsuit was built on allegations that Trump, his sons Donald Jr. and Eric, and former CFO Allen Weisselberg conspired to overstate the value of Trump Organization properties—sometimes by as much as tripling the size of a penthouse on paper—to secure better terms from banks and insurers. Testimony from Trump family members, executives, and bank officials painted a picture of a company that, as the judges put it, engaged in “a decade-long pattern of financial fraud and illegality.” The trial itself was at times chaotic, with Trump attending several days and complaining to journalists in the hallways, while Donald Trump Jr. even requested a “sexy” illustration from a courtroom artist, according to Business Insider.
The fallout has not been limited to the fraud case. James has also been targeted by federal prosecutors in the Northern District of New York, who issued two subpoenas earlier this month seeking information tied to her cases against the Trump Organization and the National Rifle Association (NRA). The Justice Department is further probing a criminal referral from the Federal Housing Finance Agency, alleging James committed mortgage fraud by misrepresenting a Virginia home as her primary residence to secure favorable loan terms. Ed Martin, now Trump’s so-called “weaponization czar,” is leading that investigation and recently urged James to resign, writing to her lawyer, “I would take this as an act of good faith.”
James’s attorney, Abbe Lowell, fired back in a letter obtained by The Hill, calling Martin’s conduct “truly bizarre, made-for-media stunt” and “outside the bounds of DOJ and ethics rules.” Lowell accused Martin of seeking “revenge” against James, arguing, “All the above indicate to me that you are not conducting a serious investigation or review of ‘mortgage fraud,’ and that, despite the lack of evidence or law, you will take whatever actions you have been directed to take to make good on President Trump’s and Attorney General Bondi’s calls for revenge for that reason alone.”
Veteran New York trial lawyer Catherine Christian described the Justice Department’s efforts as “highly unprofessional and just inappropriate,” suggesting that the alleged crime under investigation was “frivolous.” Christian, who has tried a case against James in the past, added that she doesn’t believe the attorney general will be intimidated by these mounting pressures.
The legal drama is set to continue, as both sides are expected to appeal parts of the appellate ruling. Trump may challenge the upholding of the fraud finding, while James’s office is likely to contest the vacating of the penalty and cash sanctions against Trump’s legal team. Barbara Jaffe, a retired New York Supreme Court Justice, told Business Insider, “Each side has a bone to pick.” During the appeals process, Trump cannot access the $175 million appeal bond he posted in April 2024, which is fully collateralized by his own cash and underwritten by Knight Specialty Insurance Company.
Meanwhile, the interest on Trump’s appeal bond continues to climb by $1 million every nine days, ensuring that the financial stakes remain sky-high as the case drags on. With New York’s highest court now poised to weigh in, the final chapter in this legal saga is still unwritten—and both Trump and James appear ready for the next round.
In the end, the appellate court’s decision has done little to quiet the controversy swirling around this case. Instead, it has set the stage for an even more consequential legal showdown, one that could reshape the reputations and fortunes of both the former president and New York’s top prosecutor.