Bloomberg — John Paulson was sued by his longtime business partner in Puerto Rico, who alleges the hedge fund billionaire made fraudulent claims to convince him to invest $17 million in a luxury automobile dealership on the island.
Fahad Ghaffar filed suit Wednesday in federal court in Puerto Rico, asking for more than $50 million in damages from Paulson. Ghaffar claims Paulson told him in February 2022 that he would be investing his money in a convertible note that would eventually give him 50% ownership in the dealership, F40, which a Paulson family trust had just bought for $103 million.
But Ghaffar claims he was never given the note, despite wiring the money. He further alleges that he became chief executive officer of F40, working without pay, based on the promised terms of the note. He claims Paulson emailed him in August to remove him from his role at F40.
“Ghaffar would not have purchased the convertible note and invested $17 million, but for Paulson’s misrepresentations regarding the convertible note, including his promise to deliver documentation thereof,” Ghaffar says in the suit. “Ghaffar would not have worked tirelessly on behalf of F40 to increase its profits for the benefit of Paulson, but for Paulson’s misrepresentations regarding the Convertible Note.”
Paulson’s firm denied the claims, calling them “baseless.” A spokesperson said in a statement the firm is conducting an internal investigation of Ghaffar’s actions and plans to file its own complaint.
In his suit, Ghaffar claims Paulson solicited his investment because the billionaire had become “skittish” about Puerto Rico. That would be a departure for Paulson, who has invested heavily in hotels and other businesses in the US territory and once predicted that it would become the “Singapore of the Caribbean.”
Ghaffar has been by Paulson’s side for many of his investments. According to Ghaffar’s personal website, the two met in 2013, when Paulson was in contract to buy the St. Regis Bahia Beach resort.
“With Paulson’s financial backing and Fahad’s operational skills, they significantly improved the economics of the St. Regis transaction,” Ghaffar says on his site. He praised their continuing partnership, saying Paulson Puerto Rico was set to exceed $1 billion in revenue in 2023.
Ghaffar struck a far different tone in his lawsuit. Paulson “exploited Mr. Ghaffar for 16 months of services while giving lip service to the misrepresented terms of the convertible note which he slickly failed to ever produce,” he said, referring to his tenure as F40′s CEO.
Paulson floated the possibility of moving to the island for years after buying two iconic hotels in San Juan, the Condado Vanderbilt and La Concha, which he his firm bought for $260 million in 2014. But he never made the move, and a spokesman told Bloomberg in 2022 that he no longer plans to do so.
Read more at Bloomberg.com