UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF FLORIDA 

CASE NO.: 20-CV-81205-RAR 

SECURITIES AND EXCHANGE COMMISSION, 

Plaintiff, v. 

COMPLETE BUSINESS SOLUTIONS GROUP, 

INC. d/b/a/ PAR FUNDING, et al., 

 Defendants.

____________________________________________/ 

PLAINTIFF SECURITIES AND EXCHANGE COMMISSION’S AMENDED OMNIBUS 

REPLY IN SUPPORT OF ITS MOTION FOR MONETARY REMEDIES 

 Amie Riggle Berlin 

 ATTORNEY FOR PLAINTIFF SECURITIES

 AND EXCHANGE COMMISSION

 801 Brickell Avenue, Suite 1950 

 Miami, Florida 33131 

 Telephone: (305) 982-6300 

 Facsimile: (305) 536-4154 

 berlina@sec.gov

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I. INTRODUCTION 

Defendants Lisa McElhone, Joseph LaForte, and Joseph Cole Barleta (“Cole”) filed a 

response to the Securities and Exchange Commission's Motion for Monetary Remedies 

(“Motion”), denying their underlying conduct and the consequences that arose from it and focusing 

instead on collections, distributions, and matters concerning their merchant cash advance business 

that are not before this Court. 

There is but one issue before the Court with respect to McElhone, LaForte, and Cole: the 

amount of disgorgement, prejudgment interest, and civil money penalties to be awarded against 

each of them with the allegations of the Complaint deemed as true for purposes of the 

Commission’s Motion. McElhone, LaForte, and Cole’s continued lack of contrition for their 

actions underscores the need for the Commission’s requested penalty relief against each of them. 

Their argument that the Commission failed to present a reasonable approximation of ill-gotten 

gains from the unregistered and fraudulent securities offering ignores the evidence, 

mischaracterizes the Commission’s arguments, and misconstrues the law. Contrary to the 

Defendants’ hollow assertions, the Commission’s disgorgement calculation is not based on 

investor losses and does deduct the majority of expenditures McElhone and LaForte now argue 

the Commission failed to deduct. While McElhone and LaForte argue for even more deductions, 

they utterly fail to present evidence sufficient to meet their burden. Similarly, their arguments for 

a lower penalty amount not only ignore the Complaint allegations but impermissibly challenge 

them in violation of the Consent Judgments, rely on an incorrect understanding of the “risk of loss” 

analysis, and improperly request a lower penalty figure based on a survey of random case law in 

one Circuit together with various math formulas and percentages that have no basis in the law. 

As for Michael Furman, he presents no credible evidence to meet his burden on 

disgorgement, his arguments are based on incorrect facts, and there is no merit to or credible 

evidence supporting his conclusory assertions that the Court should impose no penalty against him. 

For the reasons set forth below, the Court should grant the relief the Commission seeks. 

II. THE COURT SHOULD ENTER RELIEF AGAINST MCELHONE AND LAFORTE 

IN THE AMOUNTS THE SEC SEEKS 

A. The Commission Has Met Its Burden of Presenting A Reasonable Approximation 

of the Disgorgement Figure As To McElhone And LaForte 

Disgorgement is an equitable remedy intended to prevent unjust enrichment. Commodity 

Futures Trading Comm'n v. Sidoti, 178 F.3d 1132, 1138 (11th Cir.1999). To be entitled 

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to disgorgement, the Commissions needs only to produce a reasonable approximation of the 

defendant's ill-gotten gains. See S.E.C. v. Calvo, 378 F.3d 1211, 1217 (11th Cir. 2004) 

(“Exactitude is not a requirement; so long as the measure of disgorgement is reasonable, any risk 

of uncertainty should fall on the wrongdoer whose illegal conduct created that uncertainty.” 

(quotations marks and alterations omitted)). Once the Commission presents its estimate, the burden 

shifts to the defendant to demonstrate that the Commission did not show that its estimate was 

a reasonable approximation. Id.

The Commission provided a disgorgement calculation for McElhone and LaForte by 

identifying the amount raised in the unregistered and fraudulent securities offering scheme at issue 

in this case and then deducting from that amount the following payments and expenditures: 

 Amounts paid to investors directly; 

 Amounts paid to so-called “Agent Funds,” including among dozens of others, coDefendants/Agent Fund Managers Michael Furman, Dean Vagnozzi, and John Gissas;1

 Amounts paid to co-Defendant Perry Abbonizio for his role in the offering fraud, which 

amounts are already the subject of a disgorgement order against Abbonizio; and2 

 Amounts paid to Cole in connection with the unregistered offering fraud, which 

amounts are the subject of the disgorgement order the Commission seeks against Cole.3 

This is a reasonable approximation of the profits related to the violative conduct alleged in 

the Complaint. As set forth in the Commission’s Motion, (i) it is not possible to identify additional 

expenses, let alone legitimate expenses, of the unregistered offering fraud because McElhone and 

LaForte commingled the offering-related funds with those of their merchant cash advance 

business; (ii) McElhone and LaForte refused to participate in discovery or to provide the Courtordered sworn accountings and utilized a series of pass-through entities through which they 

transferred money to themselves;4

 and (iii) the Defendants used funds raised from investors in the 

unregistered offering fraud to pay other investors, and thus some expenditures in the offering are 

                                                            

1

 This includes Defendants Vagnozzi, Furman, and Gissas, among dozens of others. 

2

 The Court has ordered Abbonizio to disgorge these funds 

3

 The Commission seeks this amount directly from Cole as his disgorgement 

4

 These transfers have been the subject of numerous motion by the Receiver, including the most 

recent Motion for Order to Show Cause against McElhone and LaForte for siphoning receivership 

funds in violation of the Court’s asset freeze order and receivership order to finance their litigation 

team in this case. 

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actually not, as Defendants told investors, investment returns. 

Notably, McElhone and Laforte fail to establish a single legitimate business expense that 

the Commission purportedly failed to deduct. Instead, McElhone and LaForte argue that the 

Commission (1) unreasonably relies on the Receiver’s declaration of the amounts raised from 

investors and the expenditures made in the unregistered offering, and (2) fails to deduct (a) 

legitimate business expenses of their merchant cash advance business, (b) “other avenues of 

recovery that will be used to make noteholders whole,” and (c) “other equitable deductions which 

should be accepted by the Court.”5 These arguments are meritless. 

1. McElhone and LaForte Fail To Meet Their Burden For Demonstrating That The 

Commission Was Clearly Unreasonable For Relying on the Defendants’ Own 

Quickbooks Records Rather Than an Unverified Report By Brad Sharp 

McElhone and LaForte argue that the Commission’s reliance on the Receiver’s sworn 

declaration reciting amounts in the Defendants’ own Quicbooks records is unreasonable because 

Brad Sharp filed a report reflecting numbers that are $3.8 million less than those stated in the sworn 

declaration. [ECF No. 1329 at pp. 14-15]. This argument fails, for several reasons. 

As a starting point, it is important to understand that the Receiver’s sworn declaration and 

Sharp’s report are based on two different things. 

As the Receiver states in the declaration, the figures provided therein are based on the 

Defendants’ Quickbooks and financial records, which reflect that Par Funding raised 

$550,325,596 from investors and paid $300,108,117 to investors and Agent Funds. These same 

Quickbooks and financial records were analyzed by LaForte’s expert witness and the 

Commission’s expert witness during discovery. The Commission’s expert witness, accountant 

Melissa Davis, issued an expert report in August 2021 that provided the same figures and 

conclusions the Receiver summarizes in his declaration and states the records were reconciled 

[ECF No. 774-1, Davis Report, at ¶¶ 23 & 30]. The Defendants have presented no evidence or 

argument that these figures are an inaccurate representation of what the Defendants’ own 

Quickbooks records reflect. 

Instead, McElhone and LaForte rely solely on Sharp’s unsworn analysis which states Par 

Funding raised less and paid out more than Par Funding’s Quickbooks records show – specifically, 

Sharp’s report states Par Funding raised $548.8 Million from investors and paid $302.4 million to 

                                                            

5

 ECF No. at pdf p 15. 

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investors and Agent Funds. Sharp’s analysis has not been reviewed by any accountant or verified 

in any manner, the figures are not consistent with those of Davis or LaForte’s expert witness Joel 

Glick, the figures do not reflect what is shown in the Quickbooks records, and the Defendants 

present no evidence whatsoever as to why Sharp’s analysis is right and the figures reflected in the 

Quickbooks financial records (as summarized in the Receiver’s declaration and Davis report) are 

wrong.6 Nor do the McElhone and LaForte present any evidence – let alone a clear showing – that 

the Commission was unreasonable for relying on the Receiver’s summary of what the Quickbooks 

and financial records show and which figures the Commission’s own expert witness also found. 

The only thing the Defendants present is a statement by one of the Receiver’s lawyers during a 

hearing where that lawyer, who is not an accountant, stating his belief that the Sharp analysis is 

more thorough. And nothing more. This is not sufficient to meet the Defendants’ burden. 

To prove that the Commission’s calculation is not a reasonable approximation, the 

Defendants are required to clearly demonstrate that, and any risk of uncertainty falls on the 

Defendants. SEC v. Calvo, 378 F.3d 1211, 1217 (11th Cir. 2004) (“Exactitude is not a requirement; 

so long as the measure of disgorgement is reasonable, any risk of uncertainty should fall on the 

wrongdoer whose illegal conduct created that uncertainty.”). A lawyer’s comment during a 

hearing that he believes the Sharp analysis is more thorough is not a clear demonstration that the 

Commission’s reasonable approximation is unreasonable. Id. See also SEC v. The Owings Group, 

LLC, 2021 WL 1909606, at *4 (D. Md. May 12, 2021) (unsworn and conclusory exhibit does not 

overcome the SEC’s showing and “any doubts are to be resolved against the defrauding party”). 

The difference between the figures shown in the financial records (and stated in the 

Receiver’s report and Davis expert witness report) and those in the Sharp analysis is about $3.8 

million. There is a risk of uncertainty as to whether Sharp is right or the Defendants’ financial 

records (summarized in the Receiver’s declaration and Davis’s report) are right. This risk of 

uncertainty must be resolved against McElhone and LaForte as a matter of law. Id. As set forth 

in the Motion, the Defendants commingled investor funds with merchant cash advance funds, and 

the bank records reflect transactions with thousands of borrowers, investors, and other unrelated 

entities. Auditing Sharp’s report or hiring accountants to analyze it to determine if Sharp is right 

                                                            

6

 LaForte and McElhone previously filed the expert report of David Dunkelberger [ECF No. 1298-

17], which was stricken. We note only that even if that report had not been stricken, Dunkelberger 

did not opine on the Sharp figures. 

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and the Defendants’ financial records are wrong would be an inordinate expense that even the 

Defendants failed to undertake. Under these circumstances, the Court should order disgorgement 

based on the Defendants’ own Quickbooks and financial records that all parties have utilized 

throughout this case. Calvo, 378 F.3d at 1218 (“[W]here a defendant's record-keeping or lack 

thereof has so obscured matters that calculating the exact amount of illicit gains cannot be 

accomplished without incurring inordinate expense, it is well within the district court's discretion 

to rule that the amount of disgorgement will be the more readily measurable proceeds received 

from the unlawful transactions.”). 

Accordingly, the Defendants fail to meet their burden for clearly demonstrating that the 

Commission’s disgorgement figure is unreasonable due to reliance on the Defendants’ own 

financial records and Receiver’s summary thereof, which figures are identical to those found by 

the Commission’s expert witness and were not challenged in the rebuttal report issued by LaForte’s 

expert witness Joel Glick. 

2. McElhone and LaForte’s Argument That The Commission Failed To Deduct 

Disgorgement Amounts of Other Defendants Is Wrong 

McElhone and LaForte argue that “the SEC contends that the Defendants are not entitled 

to an offset for the disgorgement sought or obtained from Furman, Gissas and Vagnozzi – which 

totals approximately $7,405,248.” [ECF No. 1329 at pp. 14]. This is incorrect. 

McElhone and LaForte’s argument is that “the disgorgement awards obtained from these 

three Defendants [Furman, Gissas, and Vagnozzi] will be used to repay noteholders and will 

therefore reduce the balance of the amount raised from noteholders versus the amount repaid.” 

[ECF No. 1329 at 14-15]. This is not the proper inquiry. A disgorgement calculation is not based 

on investor losses, but on each party’s ill-gotten gains. 

As clearly set forth in the SEC’s Motion, the Commission’s disgorgement calculation for 

McElhone and LaForte includes a deduction of about $300 million, which includes among other 

things, the amount Par Funding paid to all Agent Funds.7

 The Receiver’s declaration cited by the 

Commission also explicitly states that this $300 million figure include payments to “all Agent 

                                                            

7

 Motion, ECF No. 1252 at pdf p 30 (“The Court should order McElhone and LaForte jointly and 

severally liable for disgorgement of $226,471,877, representing the amount Par Funding raised 

from investors ($550,325,596) minus the amounts Par Funding paid in principal or interest 

payments to investors and Agent Funds ($300,108,117)) (emphasis added). 

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Funds.”8 As set forth in the Complaint, Gissas, Furman, and Vagnozzi are Agent Fund managers 

and received money from Par Funding through their Agent Funds [ECF No. 119 at ¶¶ 6-7]. The 

Motion explicitly states that the $300 million the Commission deducted includes all payments by 

Par Funding “to all Agent Funds, including but not limited to Defendants Dean Vagnozzi, John 

Gissas, and Michael Furman.”9 Thus, the Defendants’ argument that the Commission did not 

deduct the amounts Par Funding paid to Vagnozzi, Gissas, and Furman is simply wrong. 

For this same reason, McElhone and LaForte’s argument that the Commission did not 

deduct Par Funding’s payments to A.G. Morgan fails [ECF No. 1329 at 16]. They claim that 

$6,950,000 should be deducted from their disgorgement figure because in a separate case recently 

filed against Agent Fund A.G. Morgan, the Commission alleges that Par Funding paid $6,950,000 

to that Agent Fund [ECF No. 1329 at 16]. As McElhone and LaForte acknowledge in their 

Response and as the Complaint they cite makes clear, A.G. Morgan is an Agent Fund. As the 

Commission’s Motion and Receiver’s Declaration clearly state, the $300 million the Commission 

deducted in its disgorgement calculation includes payments from Par Funding to all Agent Funds. 

This includes A.G. Morgan. Thus, the disgorgement sought against McElhone and LaForte does 

not include any payment by Par Funding to the Gissas, Furman, or Vagnozzi Agent Funds, the 

A.G. Morgan Agent Fund, or to any of the dozens of other Agent Funds. 

Accordingly, McElhone and LaForte’s second argument fails. 

3. McElhone and LaForte’s Argument That The Commission Failed to Reasonably 

Approximate Disgorgement Because Investors Were Supposedly Profit Participants Fails 

McElhone and LaForte next argue that the Commission’s disgorgement approximation is 

unreasonable because it includes funds raised from investors who were also profit participants 

[ECF No. 1329 at 16-17]. The crux of McElhone and LaForte’s argument is that the Commission’s 

approximation is unreasonable because any investors who were also profit participants should not, 

according to McElhone and LaForte’s view, be permitted to make claims during the claims and 

distribution phase of this case.10 Id. As an initial matter, McElhone and LaForte’s focus on investor 

                                                            

8

 Receiver’s Declaration, ECF No. 1214-1 at Exhibit 19 thereto, ¶ 7 (“[T]he company repaid to 

investors, including the “Agent Funds” a total of $300,108,117. These amounts include interest 

payments and the return of principal.”) (emphasis added). 

9

 ECF No. 1252 at pdf p30 n3. 

10 The investor claims process is separate. Investors make claims, the Receiver reviews them and 

then files a Motion concerning those claims. If and when the investors make a claim, the Receiver 

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losses and claims is wrong. The issue before the Court is disgorgement, which is based not on 

investor losses or claims, but on the Defendants’ ill-gotten gains resulting from the securities law 

violations at issue in this case. In fact, disgorgement can be ordered in an amount that is different 

from, or even exceeds the victims’ losses. See Kansas v. Nebraska, 574 U.S. 445, 463 (2015) 

(ordering disgorgement that exceeded the victim’s “actual damages”); SEC v. Huffman, 996 F.2d 

800, 802 (5th Cir. 1993) (“[A] disgorgement order might be for an amount more or less than that 

required to make the victims whole.”); See, e.g., SEC v. Laura, No. 18-CV-5075 (NGG) (VMS), 

2020 WL 8772252, at *4 (E.D.N.Y. Dec. 30, 2020) (rejecting argument that, under Liu ̧ the 

Commission's power to seek disgorgement is exactly coterminous with an individual injured 

investor's claim; the Commission’s disgorgement claims are not limited to what the harmed 

investors could recover). 

Disgorgement is sought based on McElhone and LaForte’s violations of the securities laws 

through a fraudulent offering scheme involving the unregistered offer and sale of Par Funding 

promissory notes. The investors at issue were offered and sold promissory notes in the unregistered 

offering at issue in this case. McElhone and LaForte do not dispute and in fact attach these very 

promissory notes as exhibits to their Response. Thus, the funds raised by Par Funding through the 

unregistered offer and sale of these notes are directly at issue and must be included in the 

disgorgement calculation. 

As for McElhone and LaForte’s arguments about the balance of principal and interest owed 

to these investors, that is not the issue before the Court. The Commission’s disgorgement 

calculation does not consider the balance owed on promissory notes. In fact, the interest promised 

to investors and owed on the notes does not factor into and is not included in the Commission’s 

calculation. Disgorgement is not a calculation of what investors are owed or what the investors 

were promised in future interest payments. Disgorgement is instead, again, the Defendants’ gains. 

And that is precisely what the Commission has presented to this Court. 

As for the argument that these investors are wealthy and sophisticated, even if the 

Defendants had clearly demonstrated those facts – and they offer no evidence whatsoever – it is 

irrelevant to any disgorgement calculation. There is not a special deduction where Defendants get 

                                                            

will review it and it will be handled by the Court during the claims review and distribution phase 

of this case. Right now, we are at the remedies phase against the Defendants and the issue 

concerning disgorgement is the calculation of Defendants’ ill-gotten gains. 

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to keep ill-gotten gains if their victims are wealthy and sophisticated. And as with all of their other 

arguments, the Defendants cite zero legal support for this argument. 

As such, McElhone and LaForte fail to meet their burden of clearly demonstrating the 

Commission’s disgorgement figure is not a reasonable approximation because it includes money 

raised from investors in connection with the unregistered offer and sale of the notes at issue in this 

case who are sophisticated, wealthy, or had consulting/profit-sharing agreements on the side.11 

4. McElhone and LaForte Fail To Meet Their Burden With Respect to the 

Supposed Consulting Fee Deductions They Seek 

McElhone and LaForte seek an additional $8,620,102.26 in deductions for payments they 

supposedly made to “consultants.” [ECF No. 1329 at 18-19]. They argue that if the Commission 

deducted amounts of disgorgement sought against co-Defendants Abbonizio and Cole, who 

happened to have consulting agreements, then the Commission was required to also deduct 

payments to anyone who had a consulting agreement with Par Funding. 

 Contrary to McElhone and LaForte’s argument, the mere existence of a consulting 

agreement is not the basis of any disgorgement award, deduction, or cause of action in this case. 

Disgorgement is calculated based on Defendants’ ill-gotten gains due to their violations of the 

federal securities laws. As set forth in the Complaint, Par Funding paid Abbonizio and Cole; thus 

Abbonizio and Cole’s ill-gotten gains came from the same monies at issue in the McElhone and 

LaForte disgorgement amount. As set forth in the Motion, the disgorgement amounts sought 

against Abbonizio and Cole are deducted from the amount sought against McElhone and LaForte 

in order to avoid double-counting and double recovery. 

Further, of the 24 people and entities McElhone and LaForte claim are consultants, 15 are 

in truth Agent Funds or investors. As set forth in the Motion, Par Funding’s payments to all Agent 

Funds and individual investors have already been deducted in the Commission’s disgorgement 

calculation. For the remaining 9 individuals McElhone and LaForte identify as consultants, 

McElhone and LaForte provide no evidence of what if any services were provided, whether those 

services were legitimate and provided in connection with the investment, why these purported 

                                                            

11 Not only are claims and distribution issues not before the Court, but also the Defendants have 

no standing and no role in that process. The fact that McElhone and LaForte believe they are 

entitled to decide which victims are made whole and which of their victims are not made whole 

reflects their utter lack of contrition for the seven violations of the federal securities laws to which 

they have consented. 

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consultants were paid, or any evidence whatsoever demonstrating that these were legitimate 

business expenses. Instead, McElhone and LaForte offer nothing more than a list, financial records 

showing that payments were made, and argument. This is not sufficient evidence upon which the 

Court can reduce the disgorgement amount. See United States Commodity Futures Trading 

Comm'n v. Tayeh, 848 F. App'x 827, 830 (11th Cir. 2021) (affirming disgorgement order and 

imposing plaintiff's reasonable approximation of ill-gotten gains when defendant failed to provide 

“concrete and credible evidence” to demonstrate the business expenses were legitimate). As for 

McElhone and LaForte’s assertion that these consultants in fact raised money from investors to 

fuel the unregistered offering alleged in the Complaint, even if that is true (and no clear evidence 

was presented to demonstrate this), as a matter of law these are not permissible deductions. 

Liu, 140 S. Ct. at 1950 (deductions are appropriate for “legitimate expenses” that “have value 

independent of fueling a fraudulent scheme”). 

Accordingly, McElhone and LaForte fail to meet their burden of clearly demonstrating that 

payments to these 8 individuals and entities are legitimate business expenses let alone that they 

should be `deducted.12

5. McElhone and LaForte Fail To Meet Their Burden With Respect to the 

Supposed “Legitimate Expense” Deductions They Seek 

a. McElhone and LaForte Misconstrue the Disgorgement Analysis 

As an initial matter, McElhone and LaForte argue that “[t]he Defendants in this case ran a 

profitable business that generated significant returns for noteholders. In doing so, they incurred 

legitimate expenses that must be accounted for in any equitable disgorgement award based on 

Par’s revenues.” [ECF No. 1329 at p. 20 (emphasis added)]. However, the Commission is not 

seeking disgorgement equal to the revenues from Par Funding’s merchant cash advance business. 

Instead, the Commission is seeking disgorgement based on the unjust enrichment related to the 

                                                            

12 In support of their argument, McElhone and LaForte cite Sec. & Exch. Comm'n v. Almagarby, 

No. 17-62255 (S.D. Fla. ). This is a case where the Court granted the Commission’s motion for 

disgorgement. While the Defendants describe the ruling as deducting fees paid to “finders,” that 

case did not involve an offering fraud or unregistered offering where “finders” (as used in the 

Complaint here) solicited investors. Instead, that case involved claims against individuals for 

acting as unregistered dealers in connection with stock trading. The Commission’s motion sought 

to deduct certain expenses, including those paid to finders who located stock issuers. In the instant 

case, the Commission has presented a calculation consistent with the calculation we presented in 

Almagarby, where we are asking for certain expenditures in the form of payments to Agent Funds 

to be deducted. 

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alleged unregistered and fraudulent securities offering scheme through which McElhone and 

LaForte violated eight provisions of the federal securities laws [ECF No. 119, Counts I-VIII). 

b. McElhone and LaForte’s Arguments That They Are Entitled to Deduct 

“Legitimate Business Expenses” Fail 

(i) Because All of the Promissory Note Offerings Alleged in the Complaint Were 

Unlawful, All Profits of that Offering Are Subject to Disgorgement 

 The Complaint alleges that the McElhone and LaForte, directly and through their company 

Par Funding, violated the federal securities laws by participating in the unregistered offer and sale 

of promissory notes, making material misrepresentations and omissions in connection with those 

securities offerings, participating in a fraudulent course of business, and engaging in a fraudulent 

scheme in connection with that offering (Counts I-VIII). Because all of these unregistered 

promissory note offerings described in the Complaint were unlawful, all of the profits of those 

offerings are subject to disgorgement. SEC v. Voight, 2021 WL 5181062, at *10 (S.D. TX June 

28, 2021) (finding that no legitimate expenses should be deducted from the disgorgement figure: 

“Because all of the promissory note offerings described in the Complaint were unlawful, all of the 

profits of those offerings are subject to disgorgement.”) (citing Liu, 140 S. Ct. at 1950 (recognizing 

that deductions of expenses are not required “when the ‘entire profit of a business or undertaking’ 

results from the wrongdoing”)); Faulkner, 2021 WL 75551, at *7 (“[B]ecause all of the securities 

that Hallam sold were in violation of the securities laws, the court finds that all of the compensation 

Hallam received for his role in the sale of these securities is subject to disgorgement.”); SEC v. 

Penn, Case No. 14-CV-581 (VEC), 2021 WL 1226978, at *11 n.21 (S.D.N.Y. Mar. 31 2021) (“The 

analogy between this case and Liu does not fit neatly .... Because the entire relationship between 

Ssecurion and the Fund was fraudulent, there are no legitimate expenses at issue, even if the stolen 

funds were commingled with funds that were then used to pay legitimate expenses.”). 

Liu recognizes an exception to the requirement that legitimate expenses must be deducted, 

namely where the “entire profit of a business or undertaking” results from wrongful activity. Liu, 

140 S. Ct. at 1945 (internal citation omitted). Although the Supreme Court does not define what 

constitutes an “undertaking” in this context, the unregistered offering fraud scheme alleged in the 

Complaint must fit into that category. See Penn, 2021 WL 1226978, at *11 (finding that the alleged 

securities scheme met the “undertaking” category identified in Liu). Money is fungible, so any 

portion of the funds obtained through the alleged scheme in this case that were subsequently spent 

on allegedly legitimate expenses are “merely wrongful gains under another name.” Liu, 1140 

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S.Ct. at 1950. It is undisputed that the investor funds raised through the scheme were commingled 

with the merchant cash advance business funds, which further warrants a finding that there were 

no legitimate business expenses. Penn, 2021 WL 1226978, at *11 (finding that there were no 

legitimate business expenses to deduct because the expenses were paid using commingled funds 

that contained the proceeds of the securities law scheme violation alleged in the Complaint). 

Thus, no legitimate business expenses should be deducted in this case. 

(ii) Defendants’ Use of Investor Funds to Pay Investors Their Purported Investment Returns 

Is A Further Reason Why Legitimate Business Expenses Are Not Deducted 

 The Commission has also presented a second reason why no legitimate business expenses 

should be deducted – namely, the Defendants paid investors using other investor funds and thus 

operated a second type of scheme in addition to the scheme alleged in the Complaint that is the 

subject of the fraudulent scheme Count therein. In response, McElhone and LaForte argue that 

they did not use investor funds to pay other investors because they: (1) never missed payments to 

investors; (2) made “very substantial profits” from the merchant cash advance business; and (3) 

invested in real estate and “other valuable investments.”13 [ECF No. 1329 at 20]. McElhone and 

LaForte cite no case law to support their theory that these three facts – even if true – are relevant 

to whether investor funds were used to pay other investors their supposed investor returns or to 

whether they funded Par Funding’s loans using proceeds from this type of scheme. Nor can they. 

[T]he existence of an operating business does not negate [Defendant]'s fraudulent 

conduct. While the typical Ponzi scheme involves earlier investors receiving their 

returns from the funds of later investors, often with no underlying business, the 

facts of this case still sound in fraud. ‘The likelihood that [the defendant] conducted 

some legitimate business operations does not counteract the existence of 

a Ponzi scheme because the distributions made to investors were nevertheless 

funded by other investors' money.’ In addition, commingling funds ‘is a common 

characteristic of a Ponzi scheme.’ 

                                                            

13 The Defendants’ reference here to investing in real estate and other valuable investments is not 

discussed in the Response beyond this sentence, there is no evidence or discussion provided, and 

therefore the Commission cannot respond to this prong of their argument. If they are arguing that 

they used investor funds to buy real estate and other items, the relevance of that is unclear other 

than an admission their representations to investors about the use of funds (loaning the money to 

borrowers) was false on yet another ground. Rather than speculate, the Commission merely notes 

that because this is not explained or supported, replying is neither possible nor necessary. 

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12

SEC v. Quiros, Case No. 16-cv-21301, 2016 WL 11578637 at *13 (S.D. Fla. Nov. 21 2016) 

(finding a Ponzi scheme; quoting SEC v. Helms, Case No. 13-1036, 2015 WL 1040443, at *8 

(W.D. Tex. Mar. 10, 2015)). Thus, whether the Defendants conducted some legitimate business 

operations through their merchant cash advance business does not counteract the fact investor 

funds were used to pay investors. 

Additionally, McElhone and LaForte’s argument that Par Funding generated “very 

substantial profits” ignores the sworn testimony of Par Funding’s CFO Cole in this case to the 

contrary. Cole testified that Par Funding had three sources of revenue: (1) investor funds; (2) 

merchant cash advance payments from borrowers; and (3) “joint funding partners.” [ECF No. 

1213-4 at 201:5-202:17]. Cole testified that Par Funding’s revenue from joint funding partners 

totaled only about $5 million. Id. 202:18-203:8. As for the revenue from the merchant cash 

advance loans, Cole testified that there was none; Par Funding only received back from borrowers 

an amount that was about equal to the amount Par Funding loaned out to borrowers: 

[Cole Testimony, ECF No. 1213-4 at 95:8-16]. 

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Id. at 97:18-25.14 

 Thus, Par Funding’s merchant cash advance loans broke even before expenses were 

deducted, joint funding partners generated $5 million in revenue, and the only other source of 

revenue was investor funds. 

 This begs the question: If Par Funding’s merchant cash advance business operated 

as a break-even (at best, since this is before Par Funding paid expenses) and the joint funding 

partners generated revenue of only $5 million, what sources of revenue did Par Funding use to pay 

investors $300 million in purported investment returns? 

o As Cole testified, there was only one other source of revenue at Par Funding 

– investor money. 

 As set forth in the Commission’s Motion, Sharp found that Par Funding paid investors with 

other investor money. The Commission’s expert witness, Melissa Davis, also found that Par 

Funding could not have paid investors without the inflow of more investor money. [ECF No. 774-

1 at ¶ 85]. It is undisputed that Par Funding commingled investor funds with merchant cash 

advance funds; however, LaForte’s expert witness Joel Glick admitted in his sworn testimony that 

he did not perform an analysis to determine if commingled investor funds were used to pay other 

investors their purported investment returns and in fact “specifically disregarded the 

commingling.” [ECF No. 896-4 at 92:3-9 and 100:25-12]. Meanwhile, LaForte, the de facto CEO 

of Par Funding who ran the day-to-day operations was asked during his deposition whether the 

payments made to investors included investor funds; he asserted the Fifth Amendment and refused 

to testify. [ECF No. 961-20, LaForte Testimony, at 31:22-35:3]. 

 For the reasons set forth in the Motion, the Court should find that Par Funding’s payments 

to investors consisted of commingled funds that included investor money. The Defendants’ 

arguments to the contrary are unavailing. Because investors were paid with investor money, there 

are no legitimate business expenses to deduct. 

                                                            

14 When asked whether Par Funding operated at a net loss (consider that Par Funding is breaking 

even in its loan business), LaForte asserted the Fifth Amendment and refused to answer. [ECF No. 

961-20 at 36:2-37:20]. Par Funding had its financial statements audited exactly one time – and as 

stated in the Motion, the audited financial statements state that Par Funding’s business was 

operating at a net loss and the only source of revenue sufficient to pay investors was other investor 

funds. See Audited Financial Statement attached to the Declaration of James Klenk, previously 

filed ECF No. 177-52. 

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 (iii) Even if Deducting Legitimate Business Expenses were Appropriate in this Case 

– and It is Not – McElhone and LaForte Fail to Meet of Presenting 

Concrete and Credible Evidence That Expenses Were Legitimate 

 Even if the Court decides to examine the purported legitimate business expenses argued by 

McElhone and LaForte, it is a short inquiry. The Defendants bear the burden of presenting Courts 

have re-affirmed post-Liu that the SEC must put forth a reasonable approximation of defendant’s 

ill-gotten gains and that, once the SEC has done so, the risk of uncertainty falls on the wrongdoer 

who created that uncertainty. See, e.g., SEC v. Fowler, 6 F.4th 255, 267 (2d Cir. 2021) (also 

confirming it is defendant’s burden to identify legitimate business expenses); SEC v. Goulding, --

- F.4th ---, 2022 WL 2527117, at *3 (7th Cir. July 7, 2022); SEC v. Genaudio, Inc., 32 F.4th 902, 

945 & n.22 (10th Cir. 2022); SEC v. Premier Holding Corp., 2022 WL 541194, at *1 (9th Cir. 

Feb. 23, 2022). The Defendants must “provide concrete and credible evidence to demonstrate the 

amount of money spent on any of the alleged business expenses or whether any of the business 

expenses were legitimate.” Tayeh, 848 F. App'x at 830. Deductions are only appropriate for 

“legitimate expenses” that “have value independent of fueling a fraudulent scheme.” Liu, 140 S.Ct. 

at 1950. See also SEC v. Smith, 2020 WL 6712257, at *3 (C.D. Cal. Oct. 19, 2020) (reasonable 

approximation satisfied where, “[b]ased on the records available to the SEC, it was not able to 

identify any legitimate, reasonable business expenses that should be deducted”). 

Here, McElhone and LaForte argue that the Commission’s disgorgement figure should be 

reduced by $56 million in supposed legitimate business expenses. In support, they offer nothing 

more than their own profit and loss statement for Par Funding, and the financial records showing 

the payments were made. The Profit and Loss statement only lists the names of the expenditures,15

without any detail regarding what specifically payment was for and with no indication about 

whether the expense had value independent of fueling a fraudulent scheme or was consistent with 

                                                            

15 Specifically, the Defendants cite “banking fees, computer and internet expenses, insurance costs, 

janitorial services, legal fees, other professional fees (such as accountant and tax preparation 

costs), payroll to non-insiders and utilities costs.” And nothing more. [ECF No. 1329 at 22-23]. 

They seek deductions for these expenditures without making any effort to distinguish these 

expenditures from those that fueled the violations and do not argue or show that these expenditures 

are consistent with how investors were told their money would be spent. Notably, they list 

insurance costs, while one of the Complaint allegations is that they lied to investors about having 

insurance on the investments when in truth there was none, and utilities fees despite the fact that 

the office housed numerous businesses other than Par Funding. The Defendants make no effort to 

justify deductions for these expenditures, and therefore there is no basis for doing so. 

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how investors were told their money would be spent. 

McElhone and LaForte offer no evidence whatsoever that these expenses were legitimate 

business expenses, that they have any connection whatsoever to the monies subject to 

disgorgement, that these expenses have value independent of fueling a fraudulent scheme, or that 

these expenses are consistent with what investors were told about how their investment funds 

would be spent. As such, the Court cannot reduce the disgorgement figure by the amount the 

Defendants seek. F.T.C. v. Wash. Data Res., Inc., 704 F.3d 1323, 1325 (11th Cir. 

2013) (“[D]efendants in a disgorgement action are not entitled to deduct costs associated with 

committing their illegal acts.” ); S.E.C. v. Aerokinetic Energy Corp., 444 F. App'x 382, 385 (11th 

Cir. 2011) (rejecting argument that district court should have offset defendants' ill-gotten gains by 

legitimate business expenses); Tayeh, 848 F. App'x at 830 (defendant fails to meet burden of 

showing legitimate business expenses for disgorgement deduction where defendant fails to provide 

“concrete and credible evidence” to demonstrate whether the business expenses were legitimate); 

Faulkner, 2021 WL 75551, at *7 (holding that evidence of legitimate business activities unrelated 

to the charged conduct did not reduce disgorgement liability); Penn, 2021 WL 1226978, at *11 

(expenses for things beyond what investors were told their monies would be used for are not 

deducted); The Owings Group, 2021 WL 1909606, at *4 (unsworn and conclusory exhibit does 

not overcome the SEC’s showing and “any doubts are to be resolved against the defrauding 

party”); SEC v. Griffithe, 2021 WL 6551385, at *2 (C.D. Cal. Nov. 18, 2021) (similar); SEC v. 

Erwin, 2021 WL 3773649, at *12 (D. Col. Aug. 25, 2021) (similar); SEC v. Team Resources, Inc., 

2022 WL 463390, at *2 (N.D. Tex. Feb. 15, 2022) (bare “criticism” of Commission’s 

approximation, unsupported “with any documentary evidence,” does not defeat the Commission’s 

showing). 

Accordingly, the Defendants fail meet their burden and there are no expenses that can 

deducted as “legitimate business expenses” on the record before the Court. 

6. McElhone and LaForte Fail To Meet Their Burden With Respect to the 

Supposed “FSP Legitimate Expense” Deductions They Seek 

Next, McElhone and LaForte argue that the Commission’s disgorgement calculation is not 

a reasonable approximation because it fails to deduct “legitimate” business expenses of Full 

Spectrum Processing, Inc. McElhone and LaForte present nothing more than a Profit and Loss 

Statement that lists expenses and shows they were made, with no evidence that these are legitimate 

Case 9:20-cv-81205-RAR Document 1341 Entered on FLSD Docket 08/04/2022 Page 16 of 34
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business expenses. This argument fails for the same reason the “legitimate” business expenses 

argument relating to Par Funding fails, as set forth immediately above in Sections 5(b)(i)-(iii). 

7. McElhone and LaForte’s Argument for Reductions for the Amount of Taxes 

Paid Fails as a Matter of Law 

McElhone and LaForte next argue that the Court must reduce disgorgement by the amount 

of taxes Par Funding paid [ECF No. 1329 at 24-25]. They cite no case law in support of this 

argument – because their position is contrary to the law. SEC. v. U.S. Pension Tr. Corp., 444 F. 

App'x 435, 437 (11th Cir. 2011) (holding that no authority requires the court to deduct from the 

disgorgement figure the amount of ill-gotten gains paid to the government in income tax); SEC. v. 

Merch. Cap., LLC, 486 F. App'x 93, 96 (11th Cir. 2012) (rejecting argument that the district court 

was required to take into account the amount of income taxes paid). 

Accordingly, each of McElhone and LaForte’s disgorgement arguments fails.16 

B. McElhone and LaForte’s Penalty Arguments Are Unavailing and the Court 

Should Enter the Penalties the Commission Seeks 

McElhone and LaForte fail to present compelling evidence and arguments supporting their 

position that the third-tier penalties sought against them are not appropriate. The first tier applies to 

violations that do not include fraudulent conduct. The second tier provides a higher amount for violations 

involving fraud, deceit or a deliberate or reckless disregard of a regulatory requirement. 15 U.S.C. 

§78u(d)(3)(B)(ii). The third tier applies to violations that (a) involved fraud, deceit, or a deliberate or 

reckless disregard of a regulatory requirement and (b) directly or indirectly resulted in substantial losses or 

a significant risk of substantial losses to others. 15 U.S.C. § 78u(d)(3)(B)(iii). Under the federal securities 

statutes, the Court may impose a separate civil money penalty for each of a defendant’s “act[s] or 

omission[s]” willfully violating the securities laws, counted by multiplying the statutory penalty amount by 

each unlawful transaction, each misrepresentation or omission, or even each time period of the violation. 

For example, in SEC v. Revolutionary Concepts, Inc., 2022 WL 386085, at * 10-11 (11th Cir. Feb. 

9, 2022) the Eleventh Circuit affirmed a penalty judgment based on multiplying the statutory penalty 

amount times the number of transactions that violated the securities laws. If applied in this case, the 

                                                            

16 McElhone and LaForte expend significant time arguing about receivership assets and collections 

issues. However, as stated in the Motion and as the Court noted during a recent hearing, those 

issues are not at issue on the Commission’s Motion. If the Court determines that the Response – 

which seeks a ruling on collections – should be converted to a motion and the Commission should 

respond, we will do so at that time. 

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statutory amount would be multiplied by at least 1,200 because the Complaint alleges that the Defendants 

violative conduct involved the unregistered, fraudulent offer and sale of securities to at least 1,200 investors. 

1. The Court Should Reject McElhone and LaForte’s Hollow Protestations That Their 

Conduct Does Not Reflect The Highest Level of Scienter 

McElhone and LaForte argue that a high penalty is not warranted because this case “is, at 

worst, a disclosure case.” [ECF No. 1329 at 29]. – Clearly, McElhone and LaForte lack any 

contrition for their conduct. McElhone and LaForte fail to address the facts and violations alleged 

in the Complaint, which alleges that they orchestrated a massive unregistered offering scheme 

through a company they control that defrauded more than 1,000 investors throughout the United 

States to the tune of nearly half a billion dollars, that included numerous material 

misrepresentations and omissions to investors and to the Commission, and that was orchestrated 

in order to conceal the illegal conduct from state securities regulators and to avoid compliance 

with the registration requirement of the federal securities laws. [ECF No. 119]. The conduct in 

this case with respect to the scope, wide variety of misconduct, misrepresentations and omissions, 

scheming to avoid registration and to conceal illegal conduct from the government, and lying to 

the government – all while operating a massive web of unregistered agent fund offerings – is 

unprecedented. Which is why the Defendants cannot cite a single analogous case in support of 

their argument to reduce the penalty. 

Therefore, McElhone and LaForte resort only to pointing out that at least they did not 

improperly take investor funds during their massive fraudulent and unregistered securities scheme. 

[ECF No. 1329 at 30]. Even this argument – which fails to address the allegations and arguments 

in the Complaint and Motion – is a losing argument. The Complaint alleges that “contrary to Par 

Funding’s representations to the Commission in its filings, it diverts investor funds to McElhone 

and Cole, Par Funding’s CFO, and also funnels money to The LME 2017 Family Trust, which is 

McElhone’s family trust.” [ECF No. 119 at ¶ 8]. And that these transfers occurred “for no 

legitimate purpose.” Id. at ¶ 36. Which is why McElhone’s Trust is a named Relief Defendant in 

this case. Moreover, and because McElhone and LaForte have placed this at issue by affirmatively 

raising it in their Response argument, the evidence introduced through the Receiver in this case is 

that McElhone and LaForte diverted investor funds to purchase numerous real estate properties for 

themselves, as well as luxury items. The Court has in fact expanded the Receivership to include 

these properties that McElhone and LaForte purchased with investor funds by causing Par Funding 

to transfer monies for the purchase of these properties. 

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Even without any misappropriation of investor funds for their own benefit, the Defendants’ 

conduct as set forth in the Complaint reflects the highest degree of scienter. McElhone and LaForte 

do not address scienter within the context of the Complaint allegations, because there is no winning 

argument for them to make in that regard. 

2. McElhone and LaForte’s Argument That They Created a Powerful, Lawful 

Business Is Belied By The Evidence And Even if True – Which It is Not – 

Building a Successful Company Is Not A Penalty Factor 

McElhone and LaForte acknowledge that the Commission’s framework for determining an 

appropriate penalty is appropriate and agree with the factors the Court must consider. [ECF No. 

1329 at 29]. However, they spend significant time arguing that they “created a powerful, lawful 

business” – which is not one of the seven penalty factors. Id. at 30-34. McElhone and LaForte 

make a series of arguments, each of which is addressed in turn. 

McElhone and LaForte argue that the investors were sophisticated and conducted due 

diligence. Id. at 31. In support they cite a declaration from a lawyer regarding the MCA business 

being legal and not a usurious loan practice and declarations from two agent fund managers – one 

of whom is currently a Defendant in a separate Commission action based on his alleged fraud in 

connection with the Par Funding offering. See SEC v. AJ Morgan & Camarda Complaint filed as 

an Exhibit to McElhone and LaForet’s Response. The Complaint lays out facts alleging securities 

fraud and allegations that the Defendants lied to investors. The argument that some investors were 

sophisticated and conducted due diligence, even if true, impermissibly points the finger at the 

investors. As this Court has previously found, investor reliance is not an element of any securities 

law violation alleged in this case and is not a consideration. See Court Order denying Motion to 

Dismiss in this case. Moreover, the representation is false and belied not only by the investor 

declarations filed with the Commission’s Motion for Temporary Restraining Order [ECF No. 14 

and sworn investor declaration filed therewith stating they did not know and would not have 

invested had they known], but also the investor testimony this Court heard during the Furman trial. 

 Next, McElhone and LaForte argue for several pages that their merchant cash advance 

business was not illegal and that they had financial models in place that only their expert witness, 

Joel Glick, analyzed. [ECF No. 1329 at 31-33]. This is not relevant to the penalty assessment for 

the Defendants securities law violations. The legality of merchant cash advances is not an issue 

in this case, as the Court has explained to the Defendants many times. And McElhone and 

LaForte’s arguments are belied by the expert report of Melissa Davis and reports of Brad Sharp 

Case 9:20-cv-81205-RAR Document 1341 Entered on FLSD Docket 08/04/2022 Page 19 of 34
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which are part of the record of this case and analyze the operations of the merchant cash advance 

business. But again, not relevant to the penalty for securities law violations. They go on to argue 

myriad facts about the merchant cash operations and its valuations, citing no evidence, and argue 

that investors never missed receiving a payment. Whether or not investors missed payments is not 

relevant to any issue, and Defendants fail to articulate why this is relevant. 

A business can pay investors and still be illegal under the securities laws, a scheme, and a 

fraud – which violations are what the Defendants have consented to in this case. See also SEC v. 

Quiros, Case No. 16-cv-21301, 2016 WL 11578637 at *13 (S.D. Fla. Nov. 21 2016) (finding a 

Ponzi scheme and noting this can occur even in companies that are functioning or have some aspect 

of legitimacy). The Commission is not responding to arguments about the legitimacy of merchant 

cash advance businesses because this is beyond the scope of this case and as the Court has 

explained since the preliminary injunction hearing in August 2020, whether merchant cash 

advance businesses are legal is not a feature of this case. 

 Next, McElhone and LaForte argue that Par Funding’s merchant cash advance business 

was profitable. It is unclear why this is relevant to the penalty, and the Defendants do not articulate 

it. However, as set forth above in Section II.5, Cole, the Par Funding CFO and a Defendant in this 

case, admitted under oath in this case that Par Funding’s loan business only received back from 

borrowers about the same amount that it loaned out to borrowers. In other words, the company 

broke-even, and that was before any expenses were paid. The Defendants’ arguments also ignore 

the evidence presented during the preliminary injunction hearing in this case, and specifically the 

sole audited financial statements of Par Funding, which state that the Company was operating at a 

loss in 2017. [ECF No. 177-52, Declaration of James Klenk, and Exhibit thereto; See also ECF 

No. 774-1, Expert Report of Melissa Davis, at pdf p 27, 37 (addressing the factoring revenue the 

Defendants claim and showing that in fact they were reporting factoring losses].17 

 Additionally, the Defendants’ arguments ignore the allegations in the Complaint that they 

had filed thousands of lawsuits against borrowers who had not paid on the loans, and that Par 

Funding was owed significant money on loans that were in default. [ECF No. 119]. These 

                                                            

17 As far as the Defendants relying on their own financial reports, the evidence in this case also 

shows that Par Funding had multiple copies of the same financial statements, with different 

numbers in them. ECF No. 177-52. When asked if he directed accountants to change and modify 

financial statements, LaForte asserted the Fifth Amendment. [ECF No 961-20 at 40:1-16].

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allegations are deemed as true and the Defendants are prohibited, by the terms of their Consent 

Judgments, from challenging them. 

3. McElhone and LaForte’s Argument That They Hired Many Accountants 

And Lawyers Is Not Sufficient To Warrant A Lower Penalty And They 

Are Prohibited From Challenging The Complaint Allegations 

 Similarly misplaced is the Defendants’ attempt to argue that they relied on accountants and 

lawyers [ECF No. 1329 at 34-35]. The Defendants are bound by the Complaint allegations, which 

allege that they acted with scienter – and specifically, that they acted knowingly or recklessly. 

[ECF No. 119 at ¶¶ 269, 272, 275, 278, 284, 291-93]. Pursuant to the Consent Judgments, the 

Defendants are precluded from challenging these allegations and attempting to litigate their 

affirmative defenses to them. But even if the Defendants could challenge these allegations – and 

they cannot – they cite no evidence of any accountant or lawyer who gave them advice that they 

could make any of the misrepresentations and omissions alleged in the Complaint, engage in the 

scheme and fraudulent course of business, or operate the unregistered offering of promissory notes 

alleged in the Complaint. They cite no evidence that they sought any advice, or received any 

advice, about whether they were using investor funds to pay other investors. And simply citing to 

the presence of many accountants and lawyers is not sufficient to demonstrate reliance on advice 

of counsel as a matter of law. Nor is citing deposition testimony of a Par Funding employee, James 

Klenk, stating simply that Klenk did not think Par Funding was a Ponzi scheme when he worked 

there sufficient to show reliance on any advice Klenk gave – ever, let alone during the fraud. 

The legal advice the Defendants filed with their Response [ECF No 1330-24] consists of 

three letters regarding whether merchant cash advance businesses are legal, which letters explicitly 

state that the lawyers are not giving any advice about compliance with the federal securities laws: 

Id. at pg 3 (attorney letter #1). 

Id. at pg 7 (attorney letter #2) 

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 As for the third attorney letter, it concerns only attaching liens to merchant cash advances 

and includes no reference to or discussion of any matter at issue in this case, let alone any securities 

law violation. Id. at pg 10. The only other evidence presented is an email dated March 1, 2019 

from Martin Hewitt, in which Hewitt addresses the New Jersey state cease-and-desist Order and 

states that the issue has been resolved and Par Funding should file a Form D to have registration 

exemption. Id. at 12. The Defendants present no evidence as to what they told that lawyer, whether 

they told that lawyer that they were engaged in a general solicitation (which is not subject to an 

exemption), whether they told that lawyer that they were using agent funds to solicit investors (not 

subject to an exemption), the duration of the notes (which also affects exemption), what advice if 

any they sought and received concerning the violations at issue in the Complaint, or any other fact 

necessary to establish reliance on advice of counsel. They present an email and nothing more. 

Critically, the email is from March 1, 2019, well after the Defendants began using Agent Funds to 

circumvent the registration provisions of the federal securities laws [ECF No. 119 at ¶ 62-70] and 

near the end of the unregistered offering, which this Court ended in July 2020. 

Nor can the Defendants claim that they relied on this counsel to create their Agent Fund 

scheme to avoid registration because not only does the March 2019 email not support that finding, 

but also the Complaint alleges that the Defendants orchestrated the Agent Fund scheme in order 

to circumvent the securities laws and to dupe the state securities regulators. The Complaint also 

alleges they engaged in this behavior knowingly or recklessly. Similarly, this cannot be used to 

argue reliance on advice of counsel regarding the misrepresentations and omissions about the New 

Jersey regulatory action because the Complaint alleges that these were made knowingly or 

recklessly by the Defendants. These allegations are deemed as true, and they cannot be challenged 

by the Defendants pursuant to the Consent Judgments to which the Defendants agreed.18 However, 

the Defendants impermissibly challenge the Complaint allegations throughout the Response and 

the Court should not consider that evidence. If the Court were to consider this evidence, the 

Commission would need to file counter-evidence and the trial the Consent Judgments were 

designed to avoid would have to ensure regarding the reliance defenses and all other matters the 

Defendants raise that challenge the allegations of the Complaint. 

                                                            

18 The vast majority of the Defendants’ legal advice argument concerns the legality of a merchant 

cash advance business or consists of statements unsupported by evidence. The legality of the 

merchant cash advance business is not relevant to this case. 

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Additionally, because McElhone and LaForte asserted the Fifth Amendment in response 

to discovery after any reliance on advice of counsel claim, they should be precluded from 

presenting that evidence now. See Exhibit 13 to the Commission’s Motion, ECF No 1213-13, 

LaForte’s Answers to Interrogatories 1-4 (Asserting the Fifth Amendment and refusing to identify 

any lawyers and other professions upon whose advice he relied and the substance and details of 

any such advice); Exhibit 15 to the Commission’s Motion, ECF No 1213-15, McElhone’s Answers 

to Interrogatories 1-4 (Same). As for Cole, he refused to disclose the substance of any legal advice 

received sought or received from the lawyer who sent this email on grounds it was privileged 

[Exhibit 1, Cole Interrogatory Answers], and therefore he cannot now use that privilege as a sword 

and a shield to argue the facts he previously withheld on privilege grounds. 

4. McElhone and LaForte’s Argument There Was Not Substantial Loss or 

Risk of Loss Is Incorrect and Misconstrues the Law 

 McElhone and LaForte argue that there was no substantial loss or risk of loss to investors, 

and therefore third tier penalties are inapplicable [ECF No. 1329 at 41-42]. They argue that 

McElhone did not pay herself consulting fees with investor funds, McElhone’s conduct is not 

sufficient for third tier penalties, investors were paid, and therefore there was no risk of loss. Id. 

This ignores the Complaint allegations and the law. The Complaint alleges that McElhone and 

LaForte orchestrated the fraudulent scheme laid out in the Complaint [ECF No. 119 at ¶ 5], 

controlled Par Funding and the offering, id. at ¶¶11-12, 15-18 (among others), are liable as the 

control persons for the Par Funding securities fraud (Complaint Count), diverted investor money 

to McEhone and lied about it to the Commission, Id. at ¶¶ 8, 36, 235-243], signed the promissory 

notes, Id. at ¶52, and controlled the bank accounts, Id. at ¶ 42. The Defendants are prohibited from 

challenging these allegations or the Counts to which they consented for purposes of this Motion. 

 This conduct, and the securities fraud and securities scheme counts to which McElhone 

and LaForte consented, clearly support a finding of substantial risk of loss to investors. The 

Defendants point to the fact that they paid investors, but this is not the determining factor. Instead, 

as the Eleventh Circuit has made clear, a fraudulent scheme creates a substantial risk of loss 

because the conduct would have been important to any reasonable investor. See, e.g., SEC v. 

Monterosso, 756 F.3d 1326, 1338 (11th Cir. 2014) (“While there was no direct evidence of loss, as 

the magistrate judge found, and the district judge agreed, the fraudulent scheme created a 

substantial risk of loss as the revenue overstatements would have been important to any reasonable 

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shareholder.”). Further, the evidence reflects that Par Funding could not make investor payments 

without raising additional investor funds (ECF No 774-1 and Sharp report cited in Motion), and in 

fact Par Funding stopped making investor payments before the Commission filed this case. As set 

forth in the Commission’s Motion, the investors are still owed hundreds of millions of dollars in 

principal – we have not even presented the amount they would be owed if the interest they are 

owed under the notes was calculated. Defendants make no other arguments concerning the risk of 

loss. Nor do they address any of the Complaint allegations reflecting the fraud and scheme 

allegations that give rise to such risk.

5. McElhone and LaForte’s Argument That Their Conduct Was Not 

 Egregious Is Wrong and Ignores the Complaint Allegations 

McElhone and LaForte argue that LaForte’s use of an alias was not done to defraud 

investors [ECF No. 1329 at 42-43]. However, they are prohibited from making this argument. 

The Complaint alleges that LaForte used aliases in order to conceal his felony convictions from 

investors. [ECF No. 119 at ¶ 214]. LaForte’s argument that “everyone knew” he used aliases and 

everyone knew his real identity not only impermissibly challenges the Complaint allegations, but 

also contradicts the testimony from investors in this case, including investor testimony at trial and 

the numerous investor declarations filed with the Temporary Restraining Order Motion. See also 

ECF No. 14 and Exhibits thereto: Exhibit 18, at ¶ 3; Exhibit 20 at 56:2-62:15; 53:16; Exhibit 19 

at Exh. A thereto; Exhibit 3, at 318:6-16]. As with the Defendants’ scienter, the egregiousness of 

the conduct is fully evidence by not only the Complaint allegations but the TRO Motion and the 

authenticated exhibits filed therewith [ECF Nos. 119 and 14]. 

 McElhone and LaForte also argue that their misrepresentations and omissions, including 

those in the Par Funding marketing materials McElhone approved for distribution, were not 

egregious because Par Funding was a healthy, thriving company. This issue is addressed above, 

and we do not repeat it again here. However, we note in connection with the Defendants’ argument 

about the 1% default rate [ECF No. 1329 at 43] that Cole testified during the trial against Michael 

Furman that the 1% default rate did not reflect the thousands of loans that were in default and for 

which Par Funding was suing borrowers for payment. See infra. Further, the Defendants’ argument 

that the “KPI Report” (which is the report distributed to investors touting a 1% default rate) was 

accurate is an impermissible argument. The Complaint alleges that this report and the 1% default 

rate were false and misleading. [ECF No. 119 at ¶¶ 185-203]. 

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Similarly, the Defendants impermissibly argue that the allegations that McElhone 

authorized the marketing materials for distribution are not true. [ECF No. 1329 at 43]. The 

Complaint alleges that McElhone had ultimate authority over Par Funding [ECF No. 119 at ¶ 42]. 

The Commission filed with its Motion evidence supporting the assertion that McElhone authorized 

the marketing materials. The Defendants offer no evidence that they did not participate in the 

drafting of legal documents and offering materials, other than to point out that an employee at Par 

Funding testified she emailed them out and to argue without evidence that Par Funding used legal 

counsel to draft documents. [ECF No. 1329 at 43-44]. They present nothing to rebut the testimony 

the Commission has filed with its Motion of McElhone’s sister, Jamie McElhone, that McElhone 

authorized the materials and the boss of everything at Par Funding. 

Next, the Defendants cite their Motion to Dismiss, which the Court denied, as evidence 

that Par Funding was a thriving business. [ECF No. 1329 at 44]. Again, whether Par Funding was 

thriving is not at issue, other than with respect to the securities law violations at issue and the 

allegations in the Complaint, deemed as true, that Par Funding was not the low-risk, 1% default 

trate business Defendants claimed it was. Regardless, the Motion to Dismiss was denied. As set 

forth above, Cole admitted Par Funding was only breaking even, the Receiver has filed numerous 

reports reflecting that Par Funding was not a thriving business and that the majority of loans were 

to a small group of borrowers and were in default, the Complaint (deemed as true for purposes of 

this Motion) alleges that Par Funding had thousands of lawsuits pending for defaulted loans, and 

that the default rate was at least ten times higher than what the Defendants represented it was. 

[ECF Nos. 83, 119, 180, 215, 240, 305, 358, 359, 426, 482, 666, 902, 1140, 1223, 1334]. 

The Defendants do not address the remainder of the allegations against them, for 

orchestrating the scheme alleged in the Complaint or otherwise. 

6. McElhone and LaForte’s Argument That Their Conduct Was 

Not Recurrent Is Wrong and Ignores the Complaint Allegations 

McElhone and LaForte argue that there is no evidence their conduct was recurring or how 

many investors were defrauded [ECF No. 1329 at 45]. The Complaint alleges that McElhone and 

LaForte orchestrated the entire fraudulent scheme at issue in this case and controlled Par Funding, 

and McElhone, LaForte, and Cole have all consented to the following allegations being true and 

cannot contest them: 

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Par Funding, McElhone, LaForte, and Cole, beginning no later than July 2015 and 

continuing through present19... knowingly or recklessly, employed devices, schemes or 

artifices to defraud in connection with the purchase or sale of securities. 

Par Funding, McElhone, LaForte, and Cole, beginning no later than July 2015 and 

continuing through present,... in connection with the purchase or sale of securities, have 

knowingly or recklessly made untrue statements of material facts or omitted to state 

material facts in order to make the statements made, in the light of the circumstances in 

which they were made, not misleading 

Par Funding, McElhone, LaForte, and Cole, beginning no later than July 2015 and 

continuing through present,... in connection with the purchase or sale of securities, 

knowingly or recklessly engaged in acts, practices, and courses of business which have 

operated, are now operating, and will operate as a fraud upon the purchasers of such 

securities.

Par Funding, McElhone, LaForte, and Cole, beginning no later than July 2015 and 

continuing through present,... knowingly or recklessly employed devices, schemes or 

artifices to defraud 

Par Funding, McElhone, LaForte, and Cole, beginning no later than July 2015 and 

continuing through present, ...negligently obtained money or property by means of untrue 

statements of material facts and omissions to state material facts necessary in order to make 

the statements made, in the light of the circumstances under which they were made, not 

misleading. 

Par Funding, McElhone, LaForte, and Cole, beginning no later than July 2015 and 

continuing through present,... negligently engaged in transactions, practices, or courses 

of business which operated or would have operated as a fraud or deceit upon the purchasers 

Par Funding, McElhone, LaForte, and Cole, beginning no later than July 2015 and 

continuing through present,... [participated in an unregistered securities offering] 

From no later than July 2015 through present, McElhone and LaForte have been, directly 

or indirectly, control persons of Par Funding and Full Spectrum.... 

From no later than July 2015 through present, Par Funding and Full Spectrum violated 

Section 10(b) and Rule 10b-5 of the Exchange Act. 

As control persons of Par Funding and Full Spectrum, McElhone and LaForte are jointly 

and severally liable with and to the same extent as Par Funding20.... 

[ECF No. 119 at ¶¶ 269, 272, 275, 278, 284, 291-93 (emphasis added)]. The Defendants cannot 

now argue that they only violated the securities laws sometimes or place a burden on the 

                                                            

19 The filing date in July 2020. 

20 In their Response, McElhone and LaForte ignore the conduct alleged against Par Funding 

through its employees, offering, and agents, and focus solely on themselves. However, they have 

consented to be held liable to same extent as Par Funding for the violations alleged against Par 

Funding. Since they do not address this, we note it here because the conduct of Par Funding overall 

must be factored into the penalty determination for McElhone and LaForte. 

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Commission to demonstrate each transaction. They consented to the allegations being deemed as 

true, and they are for purposes of this Motion. 

The Complaint alleges at least 1,200 investors invested through promissory notes in an 

unregistered offering orchestrated by McElhone and LaForte, whereby investors invested in the 

offering through notes McElhone and Coles signed; that these investors were defrauded in the 

Defendants’ fraudulent unregistered offering scheme; that the conduct against each specific 

Defendant at issue occurred for the course of years, and that LaForte and Cole, among many other 

instances of violative conduct, solicited at least 300 investors in one single event alone. Id. at ¶¶ 

1, 52, 95-107. The fact that the Defendants argue this conduct was isolated and not recurrent, 

given the Complaint allegations to which they consented, is further evidence of their utter lack of 

contrition and acknowledgement of the serious nature of the violations alleged against them. 

7. Defendants’ Argument About Acknowledging Wrongdoing is Meritless 

McElhone and LaForte argue that because they executed Consents, this demonstrates an 

acknowledgement of wrongdoing [ECF No. 1329 at 45]. This is wrong. In their Consents, the 

Defendants explicitly state that they are signing the Consents without admitting or denying 

liability. The arguments made in the Response also bely their hollow assertion that the Consents 

reflect an acknowledgement of wrongdoing. As set forth above, the Defendants blame the 

Commission in their Response, claim investors were sophisticated and did due diligence to detract 

from the Defendants’ fraudulent misrepresentations and omission, continue to challenge the 

Complaint allegations throughout their Response, and even try to point the finger at attorneys and 

accountants despite consenting to the Complaint allegations being true that explicitly allege the 

Defendants acted knowingly and recklessly for some violations, and negligently for others. They 

continue, even now, to point the finger at everyone else and to deny the Complaint allegations 

even though this Motion is before the Court with the Complaint allegations being deemed as true 

pursuant to a Court order to which the Defendants consented in order to avoid a trial. There is no 

basis whatsoever for a finding that they acknowledge wrongdoing. The record in this case, 

including the Complaint, reflects the opposite. 

8. McElhone and LaForte’s Argument That They Cooperated is Incorrect 

Incredibly, the Defendants argue that they cooperated because (1) Cole offered to assist the 

Receiver; and (2) this Court stated to undersigned counsel that the Defense lawyers were allowed 

to vigorously defend their clients [ECF No. 1329 at 46]. This is not evidence of cooperation. The 

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Defendants present no evidence whatsoever that Cole offered to assist the Receiver in any way, 

not even a declaration from Cole. Further, defending a client is not cooperation. If that were the 

case, then cooperation would not be a factor in any case where defendants have lawyers defending 

them. The facts set forth in the Motion and the record of this case reflect an effort by Defendants, 

from the beginning, to blame the Receiver and the Commission for their violations of the securities 

laws. They have thwarted the Receiver’s efforts and the Receiver has filed several motions to that 

effect, which are all part of the record in this case. Most recently, the Receiver filed a Motion 

alleging that McElhone and Cole paid for their defense by illegally siphoning money from the 

Receivership in violation of the asset freeze and receivership orders, and the Court has issued an 

order to show cause [ECF No. 1328 and 1332]. The fact that on the record presented in this case 

the Defendants claim that they have cooperated in this case is frankly beyond the pale. 

9. McElhone and LaForte’s Argument For Tier 2 Penalties is Meritless 

For the reasons set forth above, Tier 2 penalties are inapplicable on the facts of this 

Complaint. As set forth above, there was a risk of investor losses because of the nature of the 

allegations and violations alleged in the Complaint. McElhone and LaForte’s only argument is a 

chart they made of cases in this Circuit where they cite the penalty imposed and then calculate the 

penalty as a percentage of the disgorgement imposed, asking this Court to do the same. They can 

cite no case law where this type of calculation is used to determine a penalty. Nor do they cite any 

legal support that the Commission seeks penalties based on Circuit jurisdiction, or that Circuit 

jurisdiction is remotely relevant. The seven factors the Defendants acknowledge in their Response 

are the appropriate focus in deciding the appropriate figure, not percentages based on a lawyer’s 

math survey and statistics research project. 

As set forth in the Motion, and in this Reply, the factors for determining a penalty 

demonstrate that the Commission’s penalty request is appropriate. While the Defendants cite cases 

in a chart, they cite to no case involving the type of conduct alleged here, with the wide ranging 

misrepresentations and omissions (from concealing regulatory history to financial success to risk 

to default rates to the identity of the man at the helm, to investments being insured, and more). 

They can point to no case involving that plus the schemes and fraudulent course of business 

involved in this nationwide unregistered offering fraud. They can point to no case where the 

Defendants lied to investors, the Commission, and state regulators. They can point to no case 

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where the defendants also schemed to create an offering structure in order to avoid registering with 

the Commission. This case has no parallel. 

Nor do the Defendants adequately address and distinguish the Shapiro case cited by the 

Commission, where the conduct was similar but did not involve nearly the same scope and range 

of violations. The Defendants claim the case is inapposite because Shapiro involved a Ponzi 

scheme under Section 10(b) of the Securities Act. The Defendants fail to recognize that this case 

involves a claim – to which they consented – for that same scheme violation under the federal 

securities laws.21 The scheme alleged in the two cases might be different, but they are the same 

violation of the federal securities laws. And again, Shapiro did not involve the same broad scope 

of violative conduct involved in this case. This case is exceptionally egregious. 

III. THE COURT SHOULD ENTER RELIEF AGAINST COLE 

IN THE AMOUNTS THE SEC SEEKS 

A. Cole Fails To Meet His Burden Regarding the Disgorgement Figure 

Cole presents two arguments for reducing his disgorgement obligation, both of which lack 

merit. First, Cole argues that the disgorgement figure sought against him is incorrect because it 

includes amounts paid to him through New Field Ventures, LLC. According to Cole, payments to 

him through New Field Ventures was not alleged in the Complaint and therefore this fact is not 

deemed admitted. [ECF No. 1329 at 27]. This is incorrect. The Complaint alleges: 

McElhone received at least $11.3 million from the offering between July 2015 and 

October 2019. As for Cole, Par Funding transferred funds, which included 

investor funds, to companies in which Cole has an ownership interest or 

otherwise receives financial benefits: $1.8 million to ALB Management between 

July 2019 and October 2019; about $4.9 million to Beta Abigail between July 2016 

and April 2019; and about $9.5 million to New Field Ventures, LLC between 

February 2017 and November 2019.

Between July 2016 and November 2019, Par Funding transferred about $14.4 

million, which included investor funds, to Beta Abigail and New Field Ventures, 

LLC, companies in which Cole has an ownership or other beneficial interest 

[Amended Complaint, ECF No. 119, at ¶¶ 19 & 240]. 

Thus, Cole’s first argument fails. Cole’s arguments that he did not receive funds from Par 

Funding through New Field Ventures are prohibited under the Consents, which provide that Cole 

                                                            

21 Defendants state there was a bankruptcy case filed in connection with Shapiro. The Consent was 

not signed by a bankruptcy trustee, and Defendants fail to demonstrate the relevance of bankruptcy. 

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cannot contest the facts alleged in the Complaint and that all allegations in the Complaint are 

deemed as true for purposes of this Motion. 

Second, Cole argues that the Court must reduce his disgorgement by the amount of taxes 

Cole paid. [ECF No. 1329 at 28]. As set forth above in Section II.7, tax payments are not deducted 

from disgorgement figures. U.S. Pension Tr. Corp., 444 F. App'x at 437 (holding that no authority 

requires the court to deduct from the disgorgement figure the amount of ill-gotten gains paid to the 

government in income tax); Merch. Cap., LLC, 486 F. App'x at 96 (rejecting argument that the 

district court was required to take into account the amount of income taxes paid). 

Accordingly, Cole fails to meet his burden for demonstrating the Commission’s 

disgorgement figure is not reasonable. 

B. Cole’s Penalty Arguments Are Wrong 

Because Cole filed his response jointly with McElhone and LaForte, many of his arguments 

are addressed above in Section II.B and we do not repeat them again here. However, there are a 

few arguments that specifically concerned only Cole, which arguments are addressed here. 

Cole claims his conduct was not egregious because he did not draft the K1 report that 

disclosed a 1% default rate, and he did not know that the default rate was higher. This is belied by 

the evidence. In his deposition, Cole admitted he drafted the “KPI Report,” also known as the 

“Funding Analysis,” which is the chart distributed to investors that states the 1% default rate. See 

Motion Exhibit 4, ECF 1213-4 at 127:18-128:1, 146:17-151:21. During the Furman trial, Cole 

testified admitting that the percentage in that chart which is shown to investors (i.e., the 1% default 

rate chart as alleged in the Complaint) reflects not the loans that are in default and are not being 

paid but instead reflects the subset of those loans in default that management in its discretion 

decides to write off. See Motion Exhibit 1213-9 at 137:20-25 (Cole prepared the KPI report 

distributed to investors; Def. Exh. 29); and 1213-9 at 147:2-151:20. As Cole testified, the loans 

in default, as reflected in the thousands of cases Par Funding filed against the borrowers who had 

not paid, is different from the figure in the chart shown to investors. They are, as he testified, 

“apples and oranges.” Id. Cole not only knew that chart was being distributed to investors, but 

also as set forth in the Complaint, Cole was present when hundreds of investors were given that 

chart and were told that Par Funding had a 1% default rate [ECF No. 119 at ¶¶ 95-104]. Incredibly, 

at the time of that event in November 2019, Par Funding had filed more than 1,000 lawsuits in 

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Pennsylvania alone, seeking more than $147 million in missed Loan payments from small 

businesses. See TRO Exhibit 73 at ¶ 7(c). Thus, Cole’s claims about the K1 report are not true. 

Cole does not address of any the other conduct alleged against him in the Complaint or the 

egregiousness thereof, including allegations about his signing the promissory notes that made the 

unregistered offering happen, soliciting investors, making misrepresentations and omissions about 

Par Funding’s regulatory history, lying to the Commission about his receipt of investor proceeds 

and the involvement of LaForte in the Par Funding Form D that he signed and filed, actively 

assisting LaForte in concealing his true identity and thus his criminal background from investors, 

or making misrepresentations and omissions to investors about LaForte’s criminal history. 

Cole’s only other argument on the penalty factors, other than those previously addressed 

above in Section II.B, is that his conduct was not recurring. As set forth above, Cole consented to 

the Complaint allegations that he engaged in the violations at issue for a number of years, and the 

Complaint allegations detail specific conduct within those time ranges. [ECF No. 119 at ¶¶ 269, 

272, 275, 278, 284, 291-93]. The Consent Judgments preclude Cole from challenging these facts. 

Cole’s argument that a second tier penalty is appropriate because the violations did not 

involve the risk of investor loss is wrong for the same reasons set forth above with respect to 

LaForte and McElhone. Risk of loss analysis is based on the nature of the facts and violations 

alleged, and the Eleventh Circuit has been clear that the type of fraudulent scheme alleged here 

carries a risk of loss. See, e.g., SEC v. Monterosso, 756 F.3d 1326, 1338 (11th Cir. 2014) (“While 

there was no direct evidence of loss, as the magistrate judge found, and the district judge agreed, 

the fraudulent scheme created a substantial risk of loss as the revenue overstatements would have 

been important to any reasonable shareholder.”). Cole offers no argument of evidence, other than 

his statistics project, to demonstrate that the penalty the Commission requested is not appropriate. 

IV. THE COURT SHOULD ENTER RELIEF AGAINST FURMAN 

IN THE AMOUNTS THE SEC SEEKS 

 Furman fails to meet his burden for demonstrating the Commission’s disgorgement 

calculation is unreasonable. He argues that the trial testimony of Brad Sharp concerning Furman’s 

gains, and the trial exhibits of authenticated business records reflecting those gains, are not a 

sufficient basis for approximating Furman’s ill-gotten gains because Sharp did not independently 

verify the figures in the business record he authenticated [ECF No. 1296]. 

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 However, Furman presents no evidence that the business records, which were admitted, are 

wrong. And Furman fails to acknowledge that he failed to produce any financial documents in 

response to discovery requests and failed to file the Court-ordered sworn accounting of the 

funds he received in connection with the violations. As set forth above, the Eleventh Circuit in 

Calvo made clear that in calculating disgorgement the risk of uncertainty is against the Defendant 

– and that is particularly true where, as here, the Defendant’s failure to comply with Court orders 

and produce records is a cause of that. 

 Furman presents a declaration in an effort to now – after discovery and more than two years 

after the Court ordered it – provide some accounting. The Court should not consider this selfserving declaration because Furman failed to produce this information when he was Court ordered 

to do so in July 2020. He attaches documents he failed to produce in response to discovery and as 

set forth at trial, claimed he could not recall passwords to access his documents on his laptop. The 

Court should not permit Furman to come forward now – after discovery and two years after he 

was ordered to provide a sworn accounting – to unveil the evidence he has been concealing. The 

Court should not consider any of this evidence. 

Incredibly, Furman blames the Commission by claiming the Commission could have done 

more to get this evidence by asking Furman in his deposition. In fact, the Commission did ask 

Furman during his deposition. Attached as Exhibit 2 is the deposition of Michael Furman in which 

he testifies that he does not know how much money his Agent Fund, Fidelis, raised, the answer 

would depend on the definition of the word “raised,” and he was not sure of the specific figure 

[Exhibit 2 at 49:25-51:2]. He also testified that he did not know how much investor money Fidelis 

sent to Par Funding for the purchase of notes other than it was “north of 1 million.” Id. at 150:9-

22. He testified he did not know how much he paid himself from Fidelis. Id. at 205:17-206:25. 

Then again after his deposition occurred, the Commission sought interrogatory answers 

from Furman and Furman answered claiming that he did not know how much he received, directly 

or indirectly, in connection with the Par Funding offering because he lacked access to documents 

but would produce said documents if he ever obtained them. [ECF No. 1213-9 at Interrogatory 9]. 

He never produced them – until he filed his Response and filed them. 

 In his declaration, Furman asserts a list of expenses that he claims he made. Even if the 

Court accepts and considers this declaration, Furman makes no showing whatsoever that these 

expenses are “legitimate.” He presents no evidence other than his own declaration stating what the 

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expenses were for. Moreover, in his declaration, his descriptions clearly show these are not 

legitimate expenses because he is seeking to deduct the expenses for marketing the fraudulent and 

unregistered offering, for the legal fees to prepare the unregistered offering documents, for his own 

dental fees and travel, and other similar expenses that appear to be aimed at either fueling the 

violations or completely personal in nature. There are other descriptions that lack any detail to 

guess in theory whether the expenses are legitimate, such as insurance chargebacks and payments 

to his administrative staff who worked at United Fidelis –a company that, as Furman testified at 

trial, had numerous investments it offered other than Par Funding. Yet Furman apparently seeks 

to receive a reduction of his staff’s entire salary without any evidence that they provided legitimate 

business services or that the salary was entirely for those legitimate services associated with the 

Fidelis offering. Because Furman presents no clear and credible evidence about the expenses, 

other than that they were made, these are just theories based on Furman’s brief descriptions. 

Furman clearly has not met his burden of presenting clear and credible evidence of any legitimate 

business expense that can be deducted. 

 Furman’s next argument is that the Court cannot rely on certain evidence because Furman 

was prohibited from conducting discovery. This is false. Furman made no attempt to obtain 

discovery during the discovery period, and the Magistrate denied his efforts to do so after 

discovery had ended – an Order Furman did not appeal. 

 Furman also argues that he was prevented from introducing evidence of investor losses at 

trial. This is irrelevant. He had the opportunity to present that evidence with his Response and 

failed to do so. Furman goes on to argue at length about the risk of losses relating to Par Funding. 

The issue, however, is the risk of losses based on Furman’s conduct and violations – facts Furman 

fails to address. Next, Furman claims he lacks the ability to pay a penalty. However, he presents 

no evidence whatsoever to support that hollow assertion. Finally, Furman argues that he was not 

impeached at trial. The transcript, which the Commission filed with its Motion, speaks for itself. 

 Furman failed to meet his burden, presents no credible evidence in support of his 

arguments, and his arguments should be rejected. The Court should enter the relief the 

Commission seeks against him for the reasons set forth in the Motion. 

V. CONCLUSION 

For the foregoing reasons, the Court should grant the SEC’s motion for remedies and enter 

the proposed Final Judgments against Defendants. 

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 Respectfully submitted, 

August 3, 2022 By: s/Amie Riggle Berlin

 Amie Riggle Berlin 

 Senior Trial Counsel

 Fla. Bar No. 630020 

 Telephone: (305) 982-6362 

 Facsimile: (305) 536-4154 

 E-mail: berlina@sec.gov

 

 ATTORNEY FOR PLAINTIFF SECURITIES

 AND EXCHANGE COMMISSION

 801 Brickell Avenue, Suite 1950 

 Miami, Florida 33131 

 Telephone: (305) 982-6300 

 

 

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