Hedge Fund Manager John Paulson Sued by Investor Over Sino-Forest Bet

According to a report from DealBook, Hedge Fund manager John Paulson has been sued by a prominent investor.

Paulson became well-known for betting against the housing bubble before it collapsed in 2008--an event which made him billions. Yet, last year, one of his primary funds lost nearly 50% of its value after several key investments--including Bank of America (NYSE: BAC) and Hewlett-Packard (NYSE: HPQ)--traded down significantly.

The investor, based in Florida, has sued Pauslon over his team's failure to conduct the necessary due diligence in its investigation of Chinese reverse-merger Sino-Forest (OTC: SNOFF). The company was accused of fraud by short seller Muddy Waters last summer. Paulson subsequently dumped his stake at a huge loss before Sino-Forest's shares were eventually halted and delisted from the Nasdaq.