Renaissance Technology executives and their family members have agreed to pay $7bn (£5bn) in back taxes and fines as part of a settlement with the US tax authority.
The fines, which come as part of the largest tax settlement in US history, relate to trades made by the firm’s Medallion Fund between 2005 and 2015. The US’s Internal Revenue Service accused the company of registering short term capital gains income as long-term profit which is taxed at a lower rate, costing the Treasury billions.
The fund’s founder, Jim Simons, a former cold war codebreaker, will pay an additional $670m as part of the settlement.
In a letter to investors sent yesterday Renaissance’s Chief Executive Peter Brown said that the company had decided it better to agree a settlement with the IRS “rather than risking a worse outcome, including harsher terms and penalties, that could result from litigation.”
The Medallion Fund, started by Simons in 1988, employs 100 Ph.Ds, astrophysicists, computer scientists and statisticians who create models making short term trades. It consistently provides investors with returns 40 per cent per year, but access is restricted to friends and family.
Despite the runaway success of Medallion the majority of Renaissance fund investors lost money in the 2020 financial year. While Simons took home a pay check of $2.7bn investors who put money into the company’s RIEF fund lost 19 per cent last year.