"I would estimate 90% of hedge funds commit crimes along the way."
No way. It's a material number, but it's not 90%. Even if the author is using "hedge funds" here to refer to "long-short equity hedge funds"; the latter are often quite sketchy and operate close to the line in terms of hiring consultants who basically traffic in insider information. But the 90% estimate is asinine hyperbole.
"The 20% is the percentage of profits that the hedge fund manager takes. So if a one billion dollar hedge funds returns 10% (about the same as most mutual funds on a good year), then the profits are $100 million and the hedge fund manager makes an extra $20 million for himself (20% of $100 million)."
NOOOOOOO NONONONONONO.
The 2/20 fee structure gives GPs 20% of the carry above a specified hurdle rate that is usually in the mid-high single digits. So, in this example, if the hurdle rate were a relatively industry-standard 8%, the GPs would have earned $4mm. Not $20mm.