John Paulson

John Alfred Paulson (born December 14, 1955) is the founder and president of Paulson & Co., a New York-based hedge fund. (He is not related to former Treasury Secretary Henry Paulson, a former Goldman CEO.) Paulson & Co. reaped billions by betting against subprime mortgage securities. John Paulson was among the first on Wall Street to bet heavily against subprime mortgages. His firm earned more than $15 billion in 2007, and he pocketed $3.7 billion. He has since earned billions more, largely by betting against bank stocks and then buying them back after their shares plunged.
John Paulson
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Paulson & Co., Inc. had assets under management (as of June 1, 2007) of $12.5 billion (95% from institutions), which leapt to $36 billion as of November 2008. Under his direction, Paulson & Co has capitalized on the problems in the foreclosure and mortgage backed securities (MBS) markets. In 2008 he decided to start a new fund that would capitalize on Wall Street's capital problems by lending money to investment banks and other hedge funds currently feeling the pressure of the more than $345 billion of write downs resulting from under-performing assets linked to the housing market. 


On April 16, 2010, Paulson & Co. was mentioned by the U.S. Securities and Exchange Commission in court fillings when the SEC sued Goldman Sachs and one of Goldman's CDO traders. The SEC alleged that Goldman Sachs materially misstated and omitted facts in disclosure documents for a synthetic credit default obligations (CDO) product it originated. The allegation was that Goldman Sachs misrepresented to investors that an objective third party (ACA Management) had assembled the mortgage package underlying the CDOs when, in fact, Paulson & Co., with economic interests directly adverse to investors, had a major role in assembling the mortgage package.

As a counterparty in the CDS transaction, Paulson & Co. stood to reap great financial benefit in the event of default. (It's alleged that Paulson selected a portfolio of CDOs that were likely to default, against which Paulson & Co. had already sold short or would sell short.) Paulson & Co was not a defendant in the case.

Paulson & Co says that "it is not the subject of this complaint, made no misrepresentations and is not the subject of any charges."

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