John Paulson, the prominent hedge fund billionaire, has filed a lawsuit against his former business partner, Fahad Ghaffar, and several members of Ghaffar’s family, alleging a range of financial misconduct and fraudulent activities. The lawsuit, filed in federal court in Puerto Rico, accuses Ghaffar of siphoning millions of dollars from Paulson’s businesses to support a lavish lifestyle.
According to the suit, Ghaffar is said to have fraudulently billed approximately $3.4 million in personal expenses to Paulson’s entities. These expenses reportedly include extravagant shopping sprees at high-end brands such as Louis Vuitton and Chanel, private jet travel expenses exceeding $600,000, and a single night of partying at Las Vegas’s Omnia night club, costing $20,000. Furthermore, Ghaffar is alleged to have directed millions of dollars of Paulson’s business to companies owned by his relatives, who are accused of overcharging for their services.
John Paulson, in his lawsuit, invokes the civil version of the Racketeer Influenced and Corrupt Organizations Act (RICO), a law initially designed to combat organized crime. The lawsuit also includes claims of fraud and breach of fiduciary duty, among others, and seeks approximately $190 million in damages. The defendants named in the suit include Fahad Ghaffar, his wife, father-in-law, brother, two sisters, and personal assistant, along with several companies associated with them.
Martin Russo, an attorney representing Ghaffar, dismissed the lawsuit as a “publicity stunt” and suggested that the racketeering claim was exaggerated. He stated that leading with civil RICO indicated the weakness of Paulson’s allegations and the inability to prove any significant misconduct. Russo expressed confidence in dismantling the lawsuit and vindicating Mr. Ghaffar and his family.
This legal battle escalates a conflict that came to light in September when Ghaffar sued John Paulson, accusing the billionaire of reneging on a promise related to a $17 million investment in a Paulson-owned luxury automobile dealership. Ghaffar claimed that Paulson had failed to honor an agreement to grant him a convertible note that would eventually provide him with a 50% stake in the dealership.
The legal feud intersects with another lawsuit involving John Paulson and his wife, Jenica. She has accused him of concealing billions of dollars in assets from her within three family trusts. Both Jenica Paulson and Fahad Ghaffar have alleged that Paulson’s Puerto Rico businesses, which include luxury hotels, are primarily held by one of these trusts.
The lawsuit also provides insights into Ghaffar’s professional relationship with John Paulson. Initially an “unemployed small-time commercial real estate investor” in 2013, Ghaffar approached Paulson for an opportunity to work for him. He began as a junior analyst and gradually earned Paulson’s trust, eventually becoming a senior manager in Puerto Rico.
The suit alleges that Ghaffar used his position to enrich himself and his family, receiving gifts such as a lot for his residence as a reward for overcharging Paulson for a property project. He is also accused of orchestrating financial deals that benefited his wife, father, brother, and sisters, including inflated markups on products and services sold to Paulson’s businesses.
John Paulson further claimed that Ghaffar billed Paulson’s businesses for various personal expenses, such as wedding costs, home maintenance, personal furnishings, and personal cell phone services for household members and staff. The suit outlines extensive tabs run up by Ghaffar at Paulson’s properties, which were left unpaid, despite receiving generous discounts.
This legal battle between John Paulson and Fahad Ghaffar underscores the challenges and complexities associated with high-stakes financial disputes, as well as the importance of transparency and fiduciary responsibility in business relationships. The outcome of this lawsuit will likely be closely watched in the financial and legal communities.