Soros Fund Management is pushing into a branch of litigation finance that few hedge funds have entered.
Managers split their taxed and untaxed profits up to avoid having it all potentially taxed at a higher rate.
Paulson is making the highly levered wagers after suffering years of losses and redemptions.
The tax-dodge maneuver requires setting up LLCs for managers entitled to share carried-interest payouts.
The Treasury secretary said a carried-interest loophole being pursued by hedge-fund managers will be closed.
It will either purchase or originate mortgages on commercial buildings while buying home loans from banks, institutional investors or mortgage originators.
Her comments at Sifma's conference today came after Fidelity dismissed two managers over sexual harassment claims.
OppenheimerFunds and Nuveen Fund Advisors are also asking the SEC for more flexibility in building index-tracking ETFs.
Paulson's firm became Valeant’s biggest shareholder after Bill Ackman bailed out in March.
The walls keep closing in on John Paulson.