Thursday's layoffs included partners Victor Flores and Allen Puwalski, as well as Keith Hannan, head of trading and Brad Rosenberg, head credit trader.
Paulson & Co. said in a statement to CNBC stating, "we are rightsizing the firm to focus on our core expertise in areas that are growing."
The hedge fund surpassed competitors during the financial crisis due to its bet against subprime mortgages using a kind of insurance called credit default swaps. Paulson made an estimated $12.5 billion to $15 billion in 2007 alone.
The one-time industry leader has experienced a sharp drop in performance from its peak, with one of Paulson's funds recently losing 70 percent and causing assets under management to plunge from a peak of $38 billion in 2011, with much of the remaining cash Paulson's own money.