![\"\"](\"https:\/\/stateofthenation2012.com\/wp-content\/uploads\/2019\/07\/Screen-Shot-2019-07-12-at-5.52.12-PM.png\")
<\/a>U.S. Attorney for the Southern District of New York Geoffrey Berman announces charges against Jeffery Epstein. Stephanie Keith\/Getty Images.<\/p><\/div>\n
The origins of Jeffrey Epstein\u2019s financial empire remain a mystery to even billionaires. But the investor\u2019s former Wall Street mentor has one theory about how Epstein amassed his fortune: Fraud.<\/p>\n
In a phone interview with Observer,\u00a0Steven Hoffenberg<\/a>\u00a0alleged Epstein participated in a Ponzi scheme the two ran together in the 1980s, before using the ill-gotten gains to launch his investment company with the help of financial loans from Deutsche Bank.<\/p>\n \u201cIts a very simplistic financial fraud that he concealed from everybody that gave him tainted money,\u201d said Hoffenberg.\u00a0\u201cHe never told anybody, and I literally mean anybody, that gave him any money since he left Towers, that he was part of Towers. And that\u2019s a securities fraud because when you take money from people, you have to tell them your history.\u201d<\/p>\n Hoffenberg oversaw\u00a0Towers Financial, but was sentenced to 20 years in jail in 1997 for defrauding clients out of $450 million. Although Epstein was never charged in the case,\u00a0a lawsuit<\/a>\u00a0filed last year by former Towers investors lists the financier as \u201can uncharged co-conspirator,\u201d and alleges he \u201cknowingly and intentionally utilized funds he fraudulently diverted and obtained from this massive Ponzi scheme for his own personal use to support a lavish lifestyle.\u201d<\/p>\n \u201cIf\u00a0Jeffrey Epstein<\/a>\u00a0was materially involved in the management of Towers Financial, as his former associate Steven Hoffenberg has alleged, or he substantially assisted and had knowledge of the Ponzi scheme through various corporate transactions with Towers Financial, then he would be subject to liability for that Ponzi, and further, may have committed securities fraud on his future clients by not disclosing his prior involvement,\u201d Jeff Sonn, a securities attorney and founder of Sonn Law Group, told Observer. \u201cThe problem I see is that Hoffenberg waited some 20 years to come forward with these new allegations, and he may have reduced his 18-year sentence by implicating Epstein in the Ponzi scheme back in 1994 but didn\u2019t do so.\u201d<\/p>\n Hoffenberg said he did not tell prosecutors because he pleaded guilty at the time, but later came forward because he believed Epstein should pay restitution to Towers investors. Hoffenberg also told Observer that Deutsche Bank provided significant financial loans to Epstein.<\/p>\n \u201cHis lead bank is Deutsche Bank, Germany, that runs the lead on his financial trust company. They run the platform in the trading of the currencies for Epstein and with Epstein. He\u2019s never disclosed to the investors that provide the money to Deutsche Bank his true legacy, that\u2019s securities fraud,\u201d said Hoffenberg. \u201cAnd that makes the government available to seize all his money, literally all his money. He\u2019s not going to be able to use his money because it\u2019s got to go to a restitution fund because it\u2019s tainted money.\u201d<\/p>\n Representatives for Deutsche Bank declined to comment. An attorney for Epstein did not respond to Observer\u2019s inquiry.<\/p>\n Long considered an investment platform for the rich and powerful,\u00a0Deutsche Bank has been plagued with scandals since the 2008 Financial Crisis. In 2017, the bank reached a\u00a0$7.2 billion settlement<\/a>\u00a0with the U.S. Justice Department over allegedly misleading investors on mortgage-backed securities, and was later fined $630 million for alleged involvement in Russian money laundering.<\/p>\n Last week, Deutsche Bank announced it would cut\u00a018,000 jobs<\/a>\u00a0and downsize its investment operations.<\/p>\n