Disgraced financier and convicted sex criminal Jeffrey Epstein allegedly played a major role in a $460 million pyramid scheme years before he was accused of masterminding a lurid sex trafficking conspiracy.
Epstein was arrested in July 2019 on sex trafficking charges for allegedly sexually abusing girls for years — most of whom were lured in by recruiters under his employ. Following his high profile arrest, details emerged about the way he allegedly enlisted his longtime confidante Ghislaine Maxwell along with other women to recruit teenage girls to come back to his homes to be sexually molested for money.
Maxwell allegedly even approached some of the victims at school, promising them money in exchange for them giving a massage to Epstein. Then after allegedly being victimized, many of those teens were told they could make even more money if they could recruit their friends to do the same — much like a pyramid scheme.
Typically, the schemer or schemers at the top of pyramid schemes hire recruiters. Those recruiters, in turn, recruit so-called investors and the amount of investors increases exponentially as each investor is urged to recruit even more investors. There are financial incentives for recruiting more investors; in some pyramid schemes, that is the sole way to make money. However, typically only those at the top level are benefiting substantially.
That’s exactly what Brad Edwards, an attorney for survivors of Epstein, discovered when he was representing some of the financier's accusers in Palm Beach, Florida.
He told the producers of Netflix’s new docuseries “Jeffrey Epstein: Filthy Rich” that he built a victim chart to try to map out the case. The chart looks like a pyramid with alleged recruiters like Maxwell. He claimed that many of the recruited underage girls brought five to six people apiece — at least one alleged survivor admitting to bringing around 40 in the docuseries — to Epstein and said the chart he created could spiderweb out five times bigger than what he tracked personally.
"It's just an unbelievable scheme to have kept going for that long of a period of time,” Edwards said in the docuseries. “I've never heard of anything like this where somebody was able to set up basically a pyramid scheme, a molestation pyramid scheme.”
Epstein apparently had some experience in building pyramid schemes. His former business associate Steven Hoffenberg spent 18 years behind bars after pleading guilty to defrauding investors out of $460 million in an elaborate Ponzi scheme. He is the former chairman of Towers Financial Corporation, a debt collection agency which was exposed as a Ponzi scheme in 1993. The Securities Exchange Commission deemed it to be "one of the largest Ponzi schemes in history" at the time, according to a 1994 issue of their own news digest.
A Ponzi scheme is a form of fraud similar to a pyramid scheme, which lures investors and pays profits to the investors at the level above them gained from recent payments from new investors paying into the scheme, lured by non-existent or misrepresented assets. The scam is named for 1920s con artist Charles Ponzi.
In this case, Towers Financial used fabricated financial statements to lure investors to give the company money under false pretenses.
Hoffenberg, who also briefly managed the New York Post in 1993, told the producers of “Jeffrey Epstein: Filthy Rich” that Epstein was his “partner-in-crime” during the Ponzi scheme operation. He claimed he was introduced to Epstein under the premise that Epstein was a talented man with an "upside down" moral compass.
“He definitely appealed to us because we were running a Ponzi scheme,” he reflected. “He understood Wall Street and he could deliver substantial results in this criminal enterprise.”
Hoffenberg alleged that Epstein conducted many crimes alongside him on a daily basis.
“He took over the securities side, the fake asset side, he was manipulating the stock price, and trading stock illegally,” he claimed in the docuseries. “He’s got a gift that’s extraordinary where he controls the people he meets and manipulates them totally with his charisma.”
Journalist Vicky Ward, who wrote a 2003 Vanity Fair feature on Epstein, said in "Jeffrey Epstein: Filthy Rich" that many involved in the scheme remember Epstein as having a pivotal role “in coming up with how the scheme would work.”
Hoffenberg claimed in 2019 that he told federal prosecutors about Epstein’s alleged co-conspirator role in the Ponzi scheme as he was being investigated, National Public Radio reported last year. However, he noted in the docuseries that he didn’t turn in evidence against him.
He explained that “Jeffrey Epstein told me he was a cooperating witness for the United States Department of Justice in the past and he had traction with them.”
“I believed that Jeffrey Epstein would have been able to discredit me and say he was the white knight and he was immaculate and I knew that was his plan. You cannot grasp the magnitude of this man’s controlling effect," Hoffenberg said.
Hoffenberg has pleaded guilty to mail fraud, tax evasion and obstruction of justice in 1995 and served 18 years of his 20 year sentence.
Epstein was found hanged in a Manhattan jail cell last August. Though his death sparked a rash of conspiracy theories, authorities determined it to have been a suicide.
"Jeffrey Epstein: Filthy Rich" is now available to stream on Netflix.
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