The receiver who took over Old City-based Par Funding after it faced fraud charges last summer on Saturday asked a bankruptcy judge to give him control of 29 buildings, mostly in Center City, that the accused executives bought with “proceeds of the fraud scheme."

But lawyers for Par’s founders complained the receiver ought to be collecting loans and interest they are owed by Par’s borrowers, instead of grabbing their homes and other properties they say they bought legally.

The action by the receiver Ryan Stumphauzerrepresents a dramatic ratcheting up of pressure against Par’s founders.

The Securities and Exchange Commission in July filed civil fraud charges against Par’s chairman Lisa McElhone, her husband Joseph W. LaForte, and several associates for failing to warn investors of the risks of investing in Par, including LaForte’s status as a convicted felon. The SEC also persuaded U.S. Judge Rodolfo Ruiz to put Par, and a group of investment funds that helped finance the company, into receivership, so that Stumphauzer could locate Par’s assets for its investors.

Par charged small businesses fees that were often higher than its loan amounts, according to the SEC. It failed to warn investors of its true loan losses, falsely said its loans were insured, and blamed coronavirus shutdowns for failing to maintain investor yields of around 10 percent.

The SEC acted four months after Par stopped repaying investors' interest and principal last April. It then re-started reduced interest payments to some investors in June, but those payments stopped again when the receiver took over. Some investors have since written to Ruiz and Stumphauzer blaming them, instead of Par, for their delayed income.

Par owes $360 million to investors in the funds that the receiver is now overseeing, according to a separate report filed last Friday by Stumphauzer.

So far, the receiver has collected Par cash and electronic payments totaling almost $44 million. Lawyers for the receiver told Ruiz last month they have been collecting around $500,000 a day in borrower payments, though those payments were not detailed in the recent report. Par’s “poor underwriting” and unreconciled bank accounts have made it hard to collect, according to the receiver.

Given the challenges of making investors whole, seizing the properties that Par owners purchased improperly with investors’ money “is not only appropriate, but critical” to repaying investors, Stumphauzer wrote.

However, according to lawyers for McElhone‚ LaForte, and their former top financial officer, Joseph Cole Barleta, money for investors ought to be collected the same way they did when they still ran Par: from the company’s small-business borrowers, suing them and seizing their collateral when they fall behind.

It was “erroneous” for the receiver to suggest “that Par Funding was on unstable financial grounds” before the judge’s order, or that there were “insufficient moneys available to make investors' whole,” they wrote. The receiver and his lawyers show “a lack of basic understanding of Par’s business,” and their collections are roughly one-third of what Par brought in for its owners, even after coronavirus shutdowns reduced cash flow.

Late payments and fees are part of the “expected” business model, they added.

“Simply stated,” the defense lawyers wrote, “were Par being run properly today, the investors would be paid regularly.”The lawyers acknowledged Par’s “merchant deposits” — cash repaid by borrowers — had fallen by more than half, from $2.2 million a day in mid-March 2020, down to $1 million a day by April 1. But they added those repayments had recovered, to $1.5 million a day by late July, thanks to new lending.

While Stumphauzer wrote that 10 of the 1,300 debtors accounted for more than half of what Par is owed, the defense lawyers insisted those Par borrowers are in better shape than the receiver indicated.

To be sure, B&T, a janitorial-supply company, owed $91 million, but $89 million was “funding fees” (interest), the defense lawyers said. Colorado Homes Inc., a developer and marijuana farm landlord, had similarly repaid most of its $26 million in principal, while still owing millions in fees, collateralized by land. Kingdom Logistics, a Texas-based mining company, has repaid $35 million of $38 million it borrowed and continues to pay fees.

The defendants are considering their legal options, their lawyer, Alan Futerfas, said Monday. The case is scheduled for trial next August if the parties don’t settle.

The properties the receiver wants to take over include:

- Two other Philadelphia-based “merchant cash advance" lenders — Capital Source 2000 Inc. and Fast Advance Funding LLC — which Stumphauzer says have operated from Par’s Old City offices, are controlled by McElhone, and used LaForte as their prime broker to find borrowers;

- Four more firms owned by McElhone, LaForte and other Par insiders -- Beta Abigail LLC; NewField Ventures LLC; Heritage Business Consulting Inc.; and Eagle Six Consulting Inc. The receiver says they collected a total of $99 million from Par investors' funds—“the proceeds of the fraud scheme"— and used some “to purchase numerous income-producing properties."

- 19 real estate entities that bought a total of 25 properties — apartment buildings and homes, mostly— in Philadelphia, plus one in Fort Worth, Texas, for a total of nearly $50 million, also financed by “proceeds of the fraud.” (The properties are listed starting on Page 11 of the receiver’s report here.)

- McElhone’s homes in Haverford, purchased for $2.4 million in 2016; Paupack, in the Poconos, purchased in 2018, for $2.6 million; and Jupiter, Fla., bought last December for $5.8 million — all using at least some “fraud scheme” funds.

- McElhone’s family investment trust, which was “utilized as a conduit to effectively launder proceeds of the fraud scheme through real estate purchases.”

Some investors got hopeful news Saturday: Judge Ruiz signed an order granting a request by Dean Vagnozzi, a King of Prussia-based insurance agent who faces civil fraud accusations alongside the Par defendants, for the receivership to give up control over Pillar life-settlement funds, Atrium and ProMed litigation-finance funds, and real estate funds he sold. That would bring investors in those funds a step closer to resuming payments.

Vagnozzi had said these funds were unrelated to Par, and the receiver agreed. Under terms of the order, Vagnozzi agreed to sell his firm’s general-partnership interest in the funds within 90 days to new managers or administrators. He also agreed to pay the receiver $87,500 to cover costs, plus $60,000 he transferred out of one of his management companies at the beginning of the receivership. The order also frees $236,000 from a Capital One Bank account for Vagnozzi and his wife to use “to pay expenses.”

For now, the receivership will keep control of Vagnozzi’s agency, and his ABFP Income and Multi-Strategy funds, which were invested in Par Funding.