In this case it seems like he didn't have any full-time employees, so there isn't the employee issue.

But I'm curious as to how this might effect investors generally. I assume it could make them look bad, and cause issues with the fund LPs?

I.e. you announced an investment, did a capital call and then suddenly the money gets returned. LPs might get annoyed that money is now sitting in the fund accounts collecting interest? or I guess it just makes the fund look bad generally?