Article 1: Par Funding Owners Sentenced
Earlier this month, the long-running Par Funding scandal finally reached its dramatic conclusion. James LeFort, one of the key figures behind the fraudulent company, was sentenced to 11 years in prison. His counterpart, Joseph LaForte, received an even harsher sentence of over 15 years. Both men pleaded guilty to a litany of charges, including securities fraud, conspiracy, racketeering under the RICO Act, and tax evasion. These sentences reflect the scale and severity of their crimes, and they send a strong message to anyone operating in the merchant cash advance (MCA) or alternative lending world.
To the outside world, Par Funding looked like a thriving MCA shop, partnering with countless ISOs, brokers, and syndication partners. They appeared to be a high-volume, high-growth financial firm helping small businesses get the capital they needed. But behind the polished exterior was a criminal operation using threats, intimidation, and deception to raise hundreds of millions of dollars from unsuspecting investors.
Par employed an aggressive network of brokers, finders, and promoters to lure investors into their scheme. They sold unregistered securities and routinely misused investor funds, funneling money into personal expenses and lavish lifestyles rather than using it for actual business lending. It was a textbook case of securities fraud, and now, with over $300 million in court-ordered restitution, it stands as one of the largest fraud cases in the MCA space.
I frequently get calls from brokers asking how they can raise capital from investors to fund deals. It’s a natural progression for a successful broker — more deals, more capital needs. But what many don’t understand is that raising money from investors is not something you can just wing. If you’re not consulting a securities attorney and operating under the guidance of a proper offering structure, like a Reg D private placement, you’re playing with fire.
More importantly, the money you raise must be used exactly as you’ve represented. You can’t decide midstream to buy a car, pay off personal debt, or go on vacation with investor money. Even if you’re having short-term success, misusing funds is the beginning of the end. It may not catch up with you right away, but it always does. And when it does, you could end up in the same courtroom as the Par executives — or worse, sharing a cell.