Billionaire John Paulson’s divorce case took another dramatic turn on Thursday when his lawyers suggested during a fractious court hearing that his jilted, estranged wife should sue their own children to get access to more money.
The two sides also bickered about who was inviting more media scrutiny of the battle, which has been making headlines for more than two years as the warring spouses duke it out over eye-popping sums.
Paulson, a hedge fund manager best known for shorting the housing market in 2007, filed for divorce from his wife of more than 20 years, Jenica, in 2021. She responded with a suit accusing him of hiding billions in secret trusts created for her, their daughters, and other family members—trusts that she would lose access to when they split.
At Thursday’s hearing in Manhattan Supreme Court, the financier’s lawyers argued that because their daughters are the primary beneficiaries of the trusts, their mother needs to sue them, too, if she wants to continue the legal fight. Attorney Jim Smith listed 18 people—including the daughters, Paulson’s sisters, and the sisters’ offspring—he said should be included in the litigation.
“What Mrs. Paulson is attempting to do is have a court proceeding in which she’s asking you to terminate three trusts, which she claims are worth billions of dollars, and those 18 people don’t have a right to sit at this table and have something to do about it,” Smith told the judge. “Those 18 people must be joined in this lawsuit, and until they are, this lawsuit cannot go forward.”
Jenica’s lawyer, high-profile divorce attorney Bob Cohen, shot back, calling it “preposterous” that Paulson’s wife should have to sue her own children to enforce her rights, and slipping in a mention that the girls, ages 17 and 19, reside primarily with their mother. Forcing her to sue them, he said, “would be obviously interfering with the relationship she has with them.”
The battle continued after the hearing, when both sides took shots in fiery statements.
“Jenny is seeking to take money from her daughters by breaking trusts, astutely formed by John over 20 years ago, to increase her divorce proceeds,” Smith told The Daily Beast in a statement. “Her greed is unconscionable.”
Lanny Davis, a legal advisor to Jenica Paulson, said he found it “interesting” that neither Paulson nor his counsel testified that the hedge fund manager had ever told her about the trusts.
“Over more than 20 years of marriage, there is no denial that Mr. Paulson failed to speak even one word to Mrs. Paulson about these trusts. Not one word,” he added. “The question remains unanswered: Why not?”
The estranged spouses have been battling in court since John Paulson, 68, filed for divorce and took up with 35-year-old influencer and dietician Alina De Almeida. (Sources told Page Six that Jenica, 52, only learned of the divorce by reading about the filing in the New York Post.) Paulson, once lauded for making one of the most successful single trades of all time, has struggled to turn impressive profits in recent years and in 2020 converted his hedge fund into a private family office.
In her suit, Jenica attests that her husband accumulated billions of dollars in three trusts, starting in 2001, but never revealed to her their existence. When he filed for divorce, she was removed from the list of beneficiaries, and—she argues—cut off from a large portion of the marital assets that should be divided in the divorce. She is accusing her husband of fraud and seeking at least $1 billion in damages.
John Paulson, meanwhile, argues that he could not have created the trusts in secret because they were listed in yearly tax filings Jenica signed. (Jenica claims these documents contained no details about how the trusts were funded or who they were intended to benefit, and that the family’s accountants reviewed the filings only with her husband.) Smith told the court that Jenica’s allegations of concealed trusts are “like Alice and Wonderland,” adding: “Nothing was hidden, it was all out there, she signed the tax returns and she can’t get around that.”
The proceedings turned testy during a discussion of whether Paulson should be allowed to seal certain financial documents. Supreme Court Justice Louis Nock, who previously approved Paulson’s motion to seal the courtroom entirely before he was overturned on appeal, appeared to sympathize with the billionaire’s argument that the information in the documents is not relevant to the public interest. When Shannon Simpson, one of Jenica’s attorneys, suggested that the number of people in the courtroom suggested a significant public interest, Nock shot back: “The court has not conducted any poll of who entered this courtroom or what their interest is.”
The estranged pair’s lawyers, meanwhile, each suggested that the other had done more to attract press attention to the case.
“He’s fanning up interest, he does it all the time, not us,” Smith said of Cohen. “He gets the court coming knocking on our door.” Cohen responded by asking Smith for an apology.
Outside the courtroom, Cohen told The Daily Beast he only hired a public relations manager after leaving a previous hearing to see that Paulson had three. “I went ahead and I had to hire somebody just to make sure the record stays clear in the media,” he said.
The divorce isn’t John Paulson’s only legal headache. He is also facing legal challenges from a former business partner in Puerto Rico, Fahad Ghaffar, who claims Paulson kicked him out of their island hospitality empire out of spite when he learned his partner would be making more than he was. Paulson alleges Ghaffar defrauded his hotels and car rental companies to enrich himself and his family.
In one of his suits, Ghaffar made the shocking claim that Paulson was no longer a billionaire, and was in fact worth closer to $500 million, citing conversations with the former trader and net worth statements he filed in the course of business.
More clues to Paulson’s true net worth likely lie in the financial documents he is asking the court in his wife’s case to seal or significantly redact. The judge declined to decide the motion Thursday, saying he would reserve his ruling for a later date.