John Paulson asked a judge to sanction his former Puerto Rico business partner and his lawyers for filing a “frivolous and scandalous” lawsuit accusing the hedge fund titan of fraud.

Fahad Ghaffar’s claims that Paulson cheated him in a $17 million investment in a luxury automobile dealership were “demonstrably false,” the billionaire said Monday in a filing in federal court in Puerto Rico. Paulson said that Ghaffar and his lawyers brought the suit “solely for the purpose of harassing, defaming and denigrating” him.

Paulson asked the court to order Ghaffar and his lawyers to cover his expenses arising from the case, including legal fees.

Martin Russo, a lawyer for Ghaffar, said that the “only frivolous papers” submitted in the case were Paulson’s request for sanctions. He said Ghaffar would respond in kind.

“The case is simple,” Russo said in a statement. “It alleges that Mr. Paulson and the defendants took $17 million from Mr. Ghaffar and didn’t give him what was agreed.”

In his Sept. 6 suit, Ghaffar claimed Paulson falsely promised him in February 2022 that his investment would be in a convertible note that would eventually give him 50% ownership in the dealership, F40, which a Paulson family trust had just acquired for $103 million. Ghaffar said he worked without pay as F40’s chief executive but was never given the note before he was removed from the position in August.

Paulson on Monday said the suit omits the fact that a copy of the note was sent to Ghaffar in June 2022 and was delivered on other occasions. Ghaffar rejected the note each time and demanded new terms, Paulson said.

According to Paulson, Ghaffar’s defamatory intent was shown by his suit’s gratuitous allegation that the hedge fund founder previously committed fraud in his shorting of mortgage-backed securities ahead of the 2008 subprime crisis. That winning bet made Paulson famous on Wall Street. No regulator has accused him of fraud over his shorts.

Paulson last month filed his own suit against Ghaffar, accusing his former partner and several members of his family of participating in a racketeering operation that siphoned millions of dollars from the billionaire’s businesses. Ghaffar on Tuesday said in a court filing that the racketeering suit was deficient and asked for an order requiring Paulson to file a case statement laying out his allegations in greater specificity.

Lawyers for Paulson on Tuesday called Ghaffar’s filing a delay tactic.

The case is Ghaffar v Paulson, 23-cv-1455, US District Court, District of Puerto Rico.

--With assistance from Jim Wyss.