New York Appeals Court Throws Out Trump’s $500 Million Fraud Penalty, but Upholds Finding of Persistent Deception

A New York appeals court on Thursday struck down a monetary penalty exceeding $500 million imposed on President Donald Trump in a sweeping civil fraud case, ruling that the fine was excessive, while at the same time affirming a lower court’s core finding that Mr. Trump and his business engaged in years of systematic financial deception.

The 3–2 decision by the Appellate Division of the New York Supreme Court, First Department, represents a partial victory for Mr. Trump, relieving him—at least temporarily—of one of the largest civil penalties ever levied against a former president. But the ruling leaves intact the most consequential element of the case: a judicial determination that Mr. Trump, his company, and senior executives repeatedly inflated asset values to obtain favorable loans and insurance terms.

In a 323-page opinion, the majority concluded that while the trial judge, Justice Arthur F. Engoron, had correctly found liability for persistent fraud, the nearly $464 million disgorgement award—approximately $355 million before interest—violated constitutional limits by imposing a punishment disproportionate to the harm proven at trial.

The court sent the case back for recalculation of a reduced penalty, while preserving a series of injunctive remedies that significantly restrict the Trump Organization’s operations in New York.

A Landmark Fraud Finding Remains

Justice Engoron’s ruling in early 2024 followed a three-month bench trial brought by New York’s attorney general, Letitia James, under the state’s powerful Executive Law §63(12), which allows civil prosecution for repeated or persistent fraud.

The court found that Mr. Trump had routinely overstated the value of signature properties—including Trump Tower, the Seven Springs estate in Westchester County, and Mar-a-Lago in Florida—by hundreds of millions of dollars. In one example, Mr. Trump claimed his penthouse apartment in Trump Tower measured roughly 30,000 square feet, when it was closer to 11,000.

Justice Engoron concluded that the misstatements were not minor errors but part of a deliberate pattern designed to make Mr. Trump appear wealthier than he was, securing better loan rates, higher credit limits, and lower insurance premiums.

On appeal, the judges agreed.

“The record amply supports the finding that defendants persistently submitted materially false financial statements,” the majority wrote, rejecting arguments that the banks involved had not suffered losses or that they should have verified the figures independently.

Why the Penalty Was Reduced

Where the appeals court parted company with the trial judge was on punishment.

The majority held that while disgorgement of ill-gotten gains is appropriate, the state failed to show concrete financial losses suffered by lenders or insurers. The banks, the court noted, were repaid in full and often profited from the transactions.

As a result, the court ruled that imposing a penalty approaching half a billion dollars crossed the line from remediation into punishment, violating the Excessive Fines Clause of the Eighth Amendment.

Two dissenting judges argued that the magnitude of the fraud justified the penalty, emphasizing deterrence and the integrity of New York’s financial system.

Restrictions on Trump’s Business Stay in Place

Despite the reduction of the monetary judgment, the ruling leaves intact the most operationally damaging consequences for Mr. Trump.

The court upheld Justice Engoron’s injunctive relief, which bars Mr. Trump from serving as an officer or director of any New York corporation for three years. It also maintains the appointment of an independent monitor to oversee the Trump Organization’s financial dealings and requires advance notice of major transactions.

Legal analysts say those measures could have a greater long-term impact than any fine.

“This is a judicial declaration that Trump cannot be trusted to run his business honestly without supervision,” said Jessica Levinson, a professor at Loyola Law School. “That affects lending, partnerships, insurance—everything.”

Asset Seizure Threat Delayed, Not Eliminated

Before the appeals ruling, the size of the judgment had placed Mr. Trump at risk of asset seizure if he failed to post a bond covering the full amount during his appeal. Attorney General James had publicly stated that her office was prepared to pursue Trump-owned properties if necessary, including Trump Tower and other New York assets.

Mr. Trump ultimately secured a bond arrangement, narrowly avoiding immediate enforcement.

With the penalty now vacated, that immediate threat has receded. But it has not disappeared.

Ms. James said in a statement that she would appeal the ruling to the New York Court of Appeals, the state’s highest court, seeking reinstatement of the full penalty or a substantial portion of it.

If the higher court sides with the attorney general, Mr. Trump could once again face a requirement to post hundreds of millions of dollars in bond—or risk renewed enforcement efforts.

Political and Financial Implications

For Mr. Trump, who has long portrayed himself as a singularly successful real estate magnate, the fraud finding strikes at the core of his personal and political brand.

While he and his allies have framed criminal investigations as politically motivated, the civil fraud case relied heavily on Mr. Trump’s own financial statements and internal documents. The appellate court’s affirmation of liability cements those findings as established fact under New York law.

“This isn’t an accusation anymore,” said Norman Eisen, a former White House ethics counsel. “It’s a judicial conclusion that Trump engaged in persistent fraud.”

Banks and insurers, experts say, are likely to take note. Court-ordered monitoring and formal fraud findings can make borrowing more expensive or inaccessible, particularly for a business empire heavily dependent on leverage.

A Case That Isn’t Over

Ms. James, who brought the case in 2022, has vowed to continue pursuing accountability.

“No one is above the law,” she said, adding that her office would “use every legal avenue” to ensure that Mr. Trump faces consequences for what the courts have now confirmed was sustained financial misconduct.

For now, Mr. Trump has avoided the immediate financial catastrophe of a half-billion-dollar judgment. But the legal cloud over his business remains dense.

The appeals court decision offers him breathing room—but not exoneration. The fraud stands. The oversight remains. And the final chapter of the case may still be written by New York’s highest court.