Hedge-fund billionaires were already struggling to keep investors from heading out the door. Then along came another problem: big tax bills.
Bloomberg News reports that David Einhorn, John Paulson, Steve Cohen and other high-profile managers cumulatively owed billions of dollars to federal, state and local governments for taxes, thanks to a 2008 rule change tied to offshore holdings that gave them a decade to comply. To make the payments, they had to pull some of their own money from their funds.
For some, the bill came at a time assets were already shrinking. Einhorn took out between $200 million and $300 million from his Greenlight Capital for taxes, according to Bloomberg estimates. Clients have withdrawn almost $3 billion from his funds in the last two years. Paulson, who has lost most of his clients at Paulson & Co. since the financial crisis, also had to dip into one of his biggest hedge funds to pay the roughly $1.5 billion he owed.
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