Bridgewater Associates paid a settlement to a woman who was pushed out after engaging in a consensual relationship with top executive Greg Jensen, and shortly after it heard from another female employee that Mr. Jensen had groped her buttocks, according to people familiar with the matter.

Mr. Jensen, 43 years old, was directly mentored by Bridgewater founder Ray Dalio, 68, and groomed over two decades to succeed him as leader of the world’s largest hedge fund. At the time both incidents were brought to the company’s attention roughly three years ago, he was co-chief executive of the firm. He is now Bridgewater’s co-chief investment officer, helping oversee around $160 billion in assets and hundreds of employees.

The billionaire Mr. Dalio was personally involved in mediating both matters, people familiar with them said. Both women have since left Bridgewater and are barred by nondisclosure agreements from discussing their experiences publicly, the people said.

Mr. Dalio approved a settlement of more than $1 million for the woman who had a relationship with Mr. Jensen, the people said.

The woman who complained of being groped didn’t leave Bridgewater because of the incident, and wasn’t pushed out, the people said. She met with Mr. Dalio and continued her career elsewhere, they said. No lawyers were involved.

Mr. Jensen said in a statement: “The Wall Street Journal’s accusations of my behavior are inaccurate and salacious. They are hurtful to my family and my reputation with those who don’t know me, so I am deeply disappointed with their sense of responsibility.”

After online publication of this article, Mr. Dalio said in a statement: “I judge Greg to be a man of high character and I would not have tolerated the pattern of behavior inaccurately described by The Wall Street Journal.”

Neither incident has been previously reported.

A Bridgewater spokesman said in a statement: “This story is an uninformed misrepresentation of what actually occurred. While we are prohibited from speaking to this case, our track record speaks for itself. Because of the people, procedures and culture we have in place, Bridgewater, over the course of its 43-year history, has had very few incidents of any type, handled them thoughtfully, comprehensively and fairly, and has had no material adverse judgements.”

Westport, Conn.-based Bridgewater is the world’s largest and most successful hedge-fund firm, having produced investment gains of $49 billion for clients since 1975, more than any rival, according to LCH Investments NV, a hedge-fund investor.

Bridgewater is known for its culture of “radical transparency,” which requires most meetings to be recorded and openly ranks employees on their weaknesses. Mr. Dalio has stated that his self-written “Principles,” a list of rules for life and work, constitute a meritocratic management system he hopes to export to other companies.

Mr. Jensen joined Bridgewater as an intern in 1996 after graduating from Dartmouth College, where he was the president of his fraternity. He later signed a lifetime noncompetition agreement with Bridgewater, people familiar with the matter said. He was inducted into what Bridgewater calls its “circle of trust,” a group of roughly one dozen staffers allowed full knowledge of the firm’s investment process, the people said. Mr. Jensen is married with three children.

Mr. Jensen also serves on Bridgewater’s management and stakeholders committees, the latter of which Mr. Dalio has described in an investor letter as equivalent to the firm’s board of directors.

Between 2011 and 2016, Mr. Jensen earned $1.7 billion in compensation, according to estimates from researcher Institutional Investor’s Alpha. He pledged to invest a majority of his wealth into Bridgewater shares, including buying some of Mr. Dalio’s stake in the firm as the founder retreats from day-to-day management, the people said.

Several current and former male and female Bridgewater employees said they were at times uncomfortable with Mr. Jensen’s behavior outside of the office and at company events.

At an official off-site company celebration in 2011, Mr. Jensen hired a stripper with a feathered boa to surprise Mr. Dalio on the dais in front of an estimated 1,000 guests, according to people present. They said the move appeared to reference a longstanding rumor, since confirmed by Mr. Dalio in his recently published autobiography, that Mr. Dalio was fired from an early job in part because he brought a stripper to a convention lecture.

Mr. Jensen has frequently hosted after-hours celebrations at his Connecticut home. Former employees said they referred to his pool house as the “party barn.” In one instance, Mr. Jensen challenged each employee at a company party attended by hundreds to take a shot of alcohol with him.

Several current and former female employees whom Bridgewater suggested the Journal contact complimented Mr. Jensen.

“There are really more women than I can count—myself included—who would say Greg has been nothing but an inspiring mentor and deeply invested in their development.” said Karen Karniol-Tambour, a top deputy to Mr. Jensen.

At one official company event, Mr. Jensen began a monthslong personal relationship with a female employee who was his junior and in his line of supervision, people familiar with the matter said. During the relationship, he offered the employee encouragement and personal help to further her career at Bridgewater, these people said.

After others at Bridgewater discovered the relationship between the two, Mr. Dalio was alerted, people familiar with the matter said.

Mr. Dalio questioned Mr. Jensen and the woman together in front of a panel of top Bridgewater executives, people familiar said. Bridgewater’s human-resources department wasn’t immediately involved, the people said.

At one point, Mr. Dalio assigned James Comey, Bridgewater’s then-general counsel, to question employees about Mr. Jensen’s conduct with subordinates, including his interactions with the female employee, people familiar with the matter said. Mr. Comey would later become director of the Federal Bureau of Investigation. He couldn’t be reached for comment.

Later, Mr. Dalio told some at Bridgewater that he couldn’t determine whether Mr. Jensen or the female employee were telling the truth about the relationship, people familiar with the matter said. Mr. Dalio noted that Mr. Jensen’s overall believability had long been ranked particularly highly in Bridgewater’s rating metrics, meaning that his description of some details of the relationship carried extra credibility over hers, people familiar with the matter said.

As the investigation continued, Bridgewater put the female employee on a leave of absence, while Mr. Jensen remained at his post, these people said. At about the same time, the employee hired the well-known discrimination attorney Gloria Allred, who spoke with Mr. Dalio for several hours, the people said.

Mr. Dalio and Ms. Allred, who declined to comment, negotiated a settlement of more than $1 million, the people said. The exact terms of the settlement couldn’t be determined. After agreeing to the settlement, the employee was escorted out from her desk, they said.