Billionaire John Paulson to face fraud claim over $17M luxury car dealership investment
A judge in Puerto Rico rejected billionaire John Paulson’s bid to throw out a fraud lawsuit filed by his ex-business partner over a $17 million investment in a luxury car dealership.
US District Judge Camille L. Velez-Rive in San Juan, Puerto Rico, ruled Monday that Fahad Ghaffar can proceed with securities fraud and breach of contract claims against Paulson after he allegedly locked Ghaffar out of his half of the Puerto Rico-based company, F40.
Ghaffar — who has worked for the mogul’s Paulson Entities on the US island since 2013 — said in his $50 million lawsuit filed in federal court last year that he invested $17 million into Paulson’s dealership in 2022 with the provision that it would be converted into a 50% equity stake.
The complaint claims Paulson and his attorneys “continued to misrepresent” Ghaffar’s ownership in the car dealership venture, and that Ghaffar has not been able to obtain documentation of the convertible note that reflects his stake in the dealership.
Ghaffar’s lawsuit pointed out that while Paulson once referred to Ghaffar as F40’s president and CEO in an email Hyundai de San Juan, he shortly thereafter, around Aug. 18, 2023, claims Paulson emailed him to “remove him from all positions with F40.”
A spokesperson for Paulson confirmed months later that “Fahad was appropriately terminated from F40 in August” after Ghaffar blamed Paulson for a fire at one of F40’s dealerships that destroyed at least two Porsches worth more than $92,000 each, according to The Daily Beast.
Judge Velez-Rive, who threw out three of Ghaffar’s six complaints against Paulson, said that a note provided to Ghaffar “failed to reflect the agreement’s most basic terms,” according to her 32-page opinion obtained by The Post.
She also rejected Paulson’s argument that the note in question is “not a security” under US law.
Ghaffar’s attorney, Martin Russo, insisted to The Post that “the allegations of the securities fraud case against Mr. Paulson are very strong and will be proven.”
“Here we allege simply that Mr. Paulson and PRV [Paulson’s holdings company] convinced Mr. Ghaffar to wire approximately $17 million for a convertible note and then did not deliver that security,” Russo added.
Terrence and Darren Oved of the law firm Oved & Oved — co-counsel for Paulson PRV Holdings and John Paulson’s related entities — also claimed the judge’s decision was a “win for us.”
“It is significant that half of the claims against Paulson were decisively dismissed at this early stage even though the court was constrained to accept all plaintiff’s allegations as true,” Paulson’s counsel, Terrence Oved and Darren Oved, of the law firm Oved & Oved told The Post on Tuesday.
“We look forward to the other half being dismissed in short order.”
Ghaffar’s September lawsuit was the catalyst for a contentious in-court battle between the former business partners. The two reportedly met over a decade ago, when Paulson was under contract to buy the St. Regis Bahia Beach resort.
Just days after Paulson moved to dismiss Ghaffar’s filing, the prominent investor slapped Ghaffar with a lawsuit, which also named his wife, Glenda Acevedo-Martinez, and five other family members.
Paulson accused his longtime business partner of siphoning $3.4 million in company funds to finance his jet-set lifestyle while diverting millions more to “shell companies” owned by his wife.
Ghaffar allegedly billed Paulson Entities for $3.4 million in “personal expenses” between 2018 and 2023 — when he served as a senior manager to Paulson’s family office — including $147,000 for Louis Vuitton and Chanel shopping sprees, more than $600,000 in private jet travel and $20,000 for a single night at Las Vegas’ Omnia nightclub.
Ghaffar also set up multiple shell companies, one owned by Acevedo-Martinez to hide $3.2 million and another to embezzle $8 million from another Paulson company, Condado Dua, the lawsuit claims.
Paulson is seeking some $190 million in damages for Ghaffar’s alleged violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act, which was put into place in 1970 to take down organized crime organizations.
