Hedge Fund Billionaire John Paulson Seeks Dismissal of ‘Frivolous’ Puerto Rico Lawsuit

Hedge fund billionaire John Paulson responded to a federal lawsuit filed by his longtime business associate in Puerto Rico, Fahad Ghaffar, calling it frivolous, false and “utterly without merit.”

(Bloomberg) — Hedge fund billionaire John Paulson responded to a federal lawsuit filed by his longtime business associate in Puerto Rico, Fahad Ghaffar, calling it frivolous, false and “utterly without merit.” 

Paulson said in a court filing that Ghaffar’s lawsuit had the “sole intent of gaining media attention to capriciously defame,” and came after Ghaffar was terminated because of evidence he engaged in a “massive criminal enterprise permeating nearly every aspect of Paulson’s businesses in Puerto Rico.”  

Ghaffar’s lawsuit claims he invested $16.7 million in an auto dealership business Paulson acquired, with Ghaffar agreeing to serve as president and chief executive. In exchange for his role and the investment, Paulson promised Ghaffar a 50% stake in the business, to be documented in a convertible note. Ghaffar says the note was never delivered.  

Read more: John Paulson Sued for Fraud by Puerto Rico Business Partner

Paulson doesn’t dispute Ghaffar’s characterization of the deal, but says the convertible note was sent to Ghaffar, more than once. In the same email that Ghaffar cites outlining the terms of the deal in his complaint, Paulson “transmitted a copy of the convertible note,” says the filing, which was part of a motion to dismiss Ghaffar’s lawsuit. 

An email to Ghaffar attached as an exhibit to Paulson’s motion includes an unsigned convertible note agreement with a range of draft changes. Paulson says the convertible note was delivered multiple times, but that Ghaffar demanded new changes each time, and that the two sides were continuing to discuss drafts of the note until the end of August. 

Paulson’s lawyers, Terrence Oved and Darren Oved, said in a statement that “Ghaffar’s allegations are directly refuted by the very emails he selectively quotes in his own complaint.” 

Paulson has invested heavily in Puerto Rico and owns several luxury resorts, including the St. Regis Bahia and Condado Vanderbilt, as well as office buildings, the dealership, and a luxury residential tower under construction. Ghaffar has been involved in Paulson’s investments on the island since 2013, according to his website. 

But the relationship broke down this year, according to Paulson’s filing, when evidence was uncovered showing Ghaffar engaged in “embezzlement of corporate assets to finance an extravagant lifestyle for himself and his wife.”

Ghaffar’s lawyer responded that Paulson’s allegations were themselves, “unfounded.” 

“The notion that emails regarding a financial instrument are the same as delivering an executed document evidencing an investment is folly, which we expect the court will reject,” Martin Russo, Ghaffar’s lawyer, said in a statement.

As well as Ghaffar’s lawsuit, the 67-year-old Paulson is facing a contentious divorce from his wife Jenica, who says her husband used several trusts to shield billions of dollars of assets from her. Ownership of the auto dealership business is through one of the trusts. Paulson has a net worth of $5 billion, according to the Bloomberg Billionaires Index. 

Paulson’s filing also says he intends to seek sanctions against Ghaffar and his lawyers unless the case is withdrawn because emails between Paulson and Ghaffar “unequivocally demonstrate” that Ghaffar received the convertible note. 

The case is Ghaffar v Paulson, 23-cv-1455, US District Court, District of Puerto Rico.


–With assistance from Jim Wyss.

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