Epstein scandal: How pedophile financier made millions, money news
Jeffrey Epstein had power and influence because he had money.
This attracted both wealth and individuals seeking it. His fortune enabled the crimes he committed. Its role cannot be underestimated.
The frenzy following his death has left questions about how he came to have the money.
Epstein files: see the latest revelations
Epstein’s empire once included the largest residential estate in Manhattan, two sun-drenched islands, and three planes.
But were they the result of pure financial acumen or were there more sinister elements to them: free rein for blackmail and entrapment of people interested in security services in the guise of financial expertise?
Here’s what we know.
How much was Epstein worth?
A document signed by the convicted paedophile just two days before his suicide in 2019 shows that the value of his assets was in the region of $580m (£475m at the time) before any taxes and liabilities were paid.
The 1953 Trust—possibly named in reference to his birth year— was a trust fund that allowed the identities of its beneficiaries to be concealed, unlike a simple will.
The final version was released by the US Department of Justice (DOJ) for the first time last week with some amendments and showed that more than 40 people were set to inherit millions of dollars, including Ghislaine Maxwell ($10 million).
Where did it all begin
To understand the end, we have to find the beginning.
Born in New York, Epstein was considered a mathematics genius, but despite attending university, he never graduated.
He left studies for education – to teach teenage boys and girls without qualifications at a private school attended by many of New York’s elite.
After being fired – apparently due to his lack of teaching skills – Epstein was given a job at investment banking giant Bear Stearns by its soon-to-be chief executive, Alan “Ace” Greenberg, who had children at the school.
This was his first big break – one that would strengthen his financial position for years to come.
Epstein worked for five years but left Bear Stearns in 1981 due to a trading violation, for which the company fined him $2,500 – worth about $9,000 (£6,597) today.
He told regulators at the time that he was earning more than $200,000 a year – now about $710,000 (£520,501) – in total compensation from Bear Stearns for his work as a consultant and limited partner.
He left the bank, but his relationship with the company that became the first Domino’s to go bankrupt 27 years later continued.
Alan Greenberg, seen here in 1998, was credited with giving Epstein his big break in his career. He died in 2014. Photo: AP
big bucks
This point is where Epstein’s obsession with secrecy begins to eclipse his earnings.
There was a lack of transparency into their business interests since 1981 because they were not listed entities, although lawsuits and some filings have revealed limited data on performance.
He started his own firm, which specialised in recovering funds for individuals and, reportedly, several foreign governments, and in 1987 he was also hired as a “consultant” at the then-Tall Towers Financial Corporation.
He departed from Towers Financial Corporation in 1989, four years prior to its exposure as a Ponzi scheme. He earned $25,000 per month for his role in the towers and was never charged with the $450 million fraud.
Jay Epstein & Co., founded in 1988, is where the big money started appearing.
This entity became a financial trust company after Epstein based his financial operations in a tax haven – the US Virgin Islands.
He also started Southern Trust Company in 2011, which later became his main source of income.
Little St James Island, one of the properties of financier Jeffrey Epstein
How much did he rake in and how did he do it?
One of the big questions hanging over Epstein’s activities is the legitimacy of the revenue he earned from his clients and investments – largely tax-free.
He certainly avoided the regulations governing financial advisers, lawyers, and accountants globally by portraying himself as an advisor.
Two individuals accounted for the majority of the fees charged to Epstein’s vehicles, according to a Forbes review.
At first, Jay Epstein & Co. managed the financial affairs of American billionaire Les Wexner – the long-time boss of Victoria’s Secret.
She was found to have paid Epstein $200 million by the time they separated in 2007.
Leon Black, co-founder of private equity firm Apollo Global Management, is believed to have handed over $170 million to the institutions from 2012 to 2017. In a letter to Apollo investors in 2020, he said, “I deeply regret any involvement with them,” adding that their relationship was limited to “estate planning, taxation, and philanthropic efforts.”
Mr Wexner previously said he broke with Epstein in 2007 and denied any knowledge of his sexual abuse.
In all, Forbes said Epstein took at least $360m in dividends from his companies between 1999 and 2018 and saved himself $300m in taxes due to the US Virgin Islands jurisdiction.
Epstein’s private island. Photo: Oversight Democrats
However, the situation was not without complications.
According to the Financial Times, US prosecutors have suggested that Mr Wexner received a $100 million payment from Epstein in 2008.
It relates to the lingerie tycoon’s claims that Epstein had power of attorney over his personal financial affairs while millions of dollars were stolen from him. This included allegations of improper property purchases; FT said Epstein bought real estate from Mr Wexner’s portfolio at a discount, according to US Justice Department documents.
The repayment amount was said to have been disclosed to authorities as Mr Wexner’s legal team sought to assist their investigation of Epstein before his death in 2019.
How did King handle the Epstein scandal?
financial crisis
Epstein suffered major losses following the financial meltdown in 2008.
The financial trust was an investor in the Bear Stearns fund, which collapsed along with the bank in March of that year – the first major casualty of the crisis.
The company recorded a net loss of $166 million between 2008 and 2010 – losses that gave rise to their new venture, Southern Trust.
Widespread reports also revealed Epstein’s financial losses from investments in mortgage-backed securities at a Bermuda-based company, where he previously held the position of chairman.
What do the Epstein files reveal about the reasons for all the redactions?
What about other income sources?
Epstein oversaw Liquid Funding Ltd. for eight years until 2007.
A few months before his death, a report by the International Consortium of Investigative Journalists (ICIJ) highlighted evidence that Epstein’s assets were being “secreted” through a series of offshore shell companies based in tax havens.
ICIJ, citing papers seen by its partner McClatchy and the Miami Herald, reported that Bear Stearns was one of the owners of Liquid Funding and had interests in the financial products that became synonymous with the 2008 crash.
‘Market-sensitive information’ given to Epstein
Were his interests legitimate?
Epstein apparently made money through various vehicles, investments, and tax avoidance. These actions may be legal, but they could also be superficial.
The files released by the Justice Department only increase suspicions that Epstein’s pockets were lined with blackmail from wealthy individuals, possibly through the secret filming of sexual activities at his properties.
The “victims” may save some taxes in exchange for more business. It’s a theory that has gained popularity as journalists continue to dig into the massive document dump.
The highlighted business relationships do not imply any wrongdoing by those named.
The new Epstein files include the ‘Devil’ video and details about bank payments related to sex-trafficking operations.
And sex-trafficking operations?
JPMorgan – the US investment bank that retained Epstein as a client between 1998 and 2013 and paid for that relationship through a series of subsequent settlements – flagged more than $1 billion in suspicious transactions involving Epstein shortly after his death.
The bank told the New York Times that thousands of identified transactions could encourage sex trafficking.
his real wealth
Financial journalists have spent years trying to uncover the truth behind Epstein’s fortune.
You can see from his story that he was a master of manipulation from the beginning.
However, it wouldn’t be unexpected if additional funds emerged from legal fees, compensation, and victim settlements after his estate depletes.
