A founder of Par Funding — the Philadelphia lender facing civil charges of defrauding 1,200 investors — filed a court document on Friday saying he will likely face criminal charges with federal crimes that could include securities fraud , wire fraud, tax offenses, money laundering, extortion and obstruction.
Joseph LaForte, 51, made the unusual disclosure as he asked a Philadelphia Court of Common Pleas judge to freeze for six months any action in a new civil lawsuit filed against him and his brother by the appointed receiver by the court in the crowdfunding scandal.
This civil lawsuit alleges that the brothers received $9 million in cash “bribes or commissions” from a borrower to whom Par Funding had loaned $93 million. LaForte denied the charges.
LaForte’s attorneys detailed the criminal investigation to argue that it would be unfair for him to fight both the criminal case and the civil suit.
His attorneys said it would give him two untenable choices — reveal information in the civil case useful to federal prosecutors or take the Fifth Amendment and thereby weaken his defense in the civil suit.
In a sweeping lawsuit filed in 2020, the U.S. Securities and Exchange Commission said Par Funding defrauded its investors who had invested $540 million so the firm could make high-interest loans to many. smaller traders. The SEC said Par Funding did not tell its investors or even its own attorney that LaForte had served time for two financial crimes, including a $14 million mortgage scam.
The SEC said Par was also hiding its risky lending policies and the resulting high default rate for the companies it lent money to. The regulator said LaForte, his wife, Lisa McElhone, and other owners and a list of financial pitchmen siphoned off tens of millions of dollars before the SEC intervened.
Without admitting wrongdoing, those who profited from the crowdfunding dropped their opposition to the SEC action and agreed to return the money. US District Judge Rodolfo A. Ruiz II, who sits in Fort Lauderdale, must now decide how much to order them to repay the investors.
Although Par Funding operated primarily out of Philadelphia and had its main office at Fifth and Walnut streets, the SEC filed its case in Florida, where Par Funding had moved its headquarters in 2017. Ruiz appointed an attorney from Miami, Ryan Stumphauzer, as receiver in the case. He is in turn assisted by Philadelphia attorney Gaetan Alfano.
In his filing, LaForte predicted that the upcoming federal charges would be added to a firearms case he already faces. The FBI arrested LaForte in 2020 after raiding his $2.4 million Haverford home and seizing four handguns, two shotguns and a rifle. His trial for unlawful possession of firearms by a felon is scheduled for October.
LaForte and McElhone founded Par Funding in Philadelphia in 2011 shortly after his release from prison. He served time for mortgage fraud and was convicted of running an illegal overseas gambling operation.
In an affidavit attached to the docket, prominent defense attorney Brian McMonagle, who is part of LaForte’s defense team, says he met with three federal prosecutors in March and they told him that a Federal grand jury was hearing evidence on LaForte.
While federal prosecutors had said publicly after the gunshot arrest that they were investigating LaForte for financial crimes, Friday’s disclosure broke new ground by saying charges were “highly likely.” LaForte said federal prosecutors, the FBI and the IRS are investigating him.