Top executives at hedge fund Renaissance Technologies are reportedly set to pay back around $7bn in taxes in what is thought to be the largest tax settlement in US history.
According to a letter to investors seen by the Financial Times, its founder and mathematician Jim Simmons will also pay an additional $670m to the IRS in order to put to rest the case which centres around trades made by the firm’s Medallion fund between 2005 and 2015.
The IRS puts forward that executives at the firm converted short-term capital gain using complex options into long-term profits, which are then taxed at a considerably lower rate.
According to the outlet, Renaissance chief executive, Peter Brown said in the letter that the firm agreed to the settlement after it “ultimately concluded that the interest of our investors from the relevant period would be best served by agreeing to this resolution with the IRS, rather than risking a worse outcome, including harsher terms and penalties, that could result from litigation.”
As Medallion is not open to public investors, the settlement will only affect inside investors and their friends and family.