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Fraud

Par Funding Ponzi Scheme: Lawyers Seek to Double Investor Payouts

Strategic Insights

— 1 min read

A panel of lawyers will hear a disciplinary case against John Pauciulo, a former partner at Eckert Seamans, this week, amid plans to double the cash sent to investors in the Philadelphia-based Par Funding scam. The scheme, led by founder Joseph LaForte and his associates, collected over $500 million from investors from 2011 to 2020, with many losing a total of $226 million. The SEC has seized assets to be returned to investors, and the scheme's leaders have been sentenced to prison for criminal fraud and conspiracy.

Key Takeaways:

  • Over 1,700 investors were left with net losses totaling $226 million after Par Funding stopped paying principal and interest in 2020.
  • The SEC has seized assets worth over $111 million, which will be distributed to investors, with another $108 million available for distribution.
  • A $10 million tax refund application to the IRS is still in the works, as well as negotiations to turn over LaForte's former Cessna jet and a Charles Schwab investment account worth an estimated $20 million.
  • John Pauciulo, a former partner at Eckert Seamans, is facing charges of misconduct and Rule 4.1(a)(3) of the Pennsylvania Rules of Disciplinary Enforcement for his alleged role in the Par scheme.
  • Pauciulo's defense lawyer claims he provided "private" advice and was not part of the fraud, but the disciplinary board will hear evidence and witnesses before deciding on any penalties.
  • The receivership has run up over $60 million in lawyer fees, Par staff and operating expenses, and other costs over the last five years.

Statistics:

  • $500 million: The total amount invested by investors in Par Funding from 2011 to 2020.
  • $226 million: The net losses suffered by investors after Par Funding stopped paying principal and interest in 2020.
  • $111 million: The amount of cash authorized by federal Judge Rodolfo Ruiz to be distributed to investors in December.
  • $108 million: The additional amount available for distribution to investors.
  • $20 million: The estimated value of LaForte's Charles Schwab investment account.
  • $60 million: The amount spent on lawyer fees, Par staff and operating expenses, and other costs over the last five years.
  • 1,700: The number of investors left with net losses.

Sources:

  • "Five years after Par Funding's collapse, lawyers consider doubling payouts" by Joseph N. DiStefano, The Philadelphia Inquirer, August 2023.

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