Paulson Wins $47 Million in Arbitration With Ex-Business Partner

John Paulson was awarded more than $47 million by an arbitrator who found that the billionaire’s former Puerto Rico business partner cheated him on one investment and usurped him on another.

Fahad Ghaffar breached his fiduciary duty by advising Paulson against making an investment in a payments company, then turned a $35.7 million profit by buying the shares himself, the arbitrator, Carolyn Demarest, said. She also found that Ghaffar hid his interest in a software company in which he “fraudulently induced” Paulson to make a $12.2 million investment.

Though arbitrations are normally confidential, Demarest’s April 12 interim award was disclosed earlier this week by Paulson in one of several lawsuits that he and Ghaffar have filed against each other over the last three years. In his own Wednesday filing, Ghaffar said he intended to challenge the award in the arbitration’s second phase and highlighted areas where Demarest had ruled in his favor.

The arbitrator rejected several of Paulson’s other claims of fraud against Ghaffar, the billionaire’s onetime right-hand man in Puerto Rico. She found there was no evidence that Ghaffar’s wife committed fraud when she sold furniture to Paulson’s hotels in US territory or that Ghaffar committed fraud in charging expenses to Paulson.

“It is clear that Mr. Ghaffar took every advantage of his position in managing the vast and complex facilities that comprise Paulson PR while creatively expanding and improving them, adding very substantial value,” the arbitrator wrote in her decision.

Demarest’s language allowed both sides to claim vindication ahead of the second phase of the arbitration which will consider Ghaffar’s claims that he’s owed about $21.7 million for breach of contract, unpaid commissions and tax credits, which Paulson is contesting.

“We will prove that the Paulson entities misled the arbitrator and specifically that there are no damages,” Ghaffar’s lawyer, Martin Russo, wrote in a text message Tuesday.

Paulson’s lawyers, Terrence and Darren Oved of Oved & Oved, called the decision a “highly successful result” and said they were “determined to see this matter through to its conclusion.”

Ghaffar initiated the arbitration in September 2023, claiming he was wrongfully terminated from Paulson’s Puerto Rico company and denied compensation under a 2019 deal. Demarest said Paulson had demonstrated Ghaffar was properly fired for cause over the fraudulent software investment.

At about the same time as he began the arbitration, Ghaffar separately sued Paulson for allegedly cheating him on a $17 million investment in a luxury auto dealership. Paulson’s firm said at the time that the allegations were “baseless.” The case was confidentially settled in October 2024.

In October 2023, Paulson filed a suit accusing Ghaffar of siphoning money from his businesses to enrich himself and his family at the billionaire’s expense. That suit was stayed pending the outcome of the arbitration, which addressed many of the same fraud allegations. Ghaffar has denied Paulson’s claims.

Top photo: Billionaire John Paulson, president and founder of Paulson & Co., during a Bloomberg Television interview at his home on Long Island, New York, on Thursday, Aug. 12, 2021. Paulson talked about the trade that made him a billionaire, gold, cryptocurrencies and inflation. Source: Bloomberg Television.