It's one of those Wall Street mysteries: How did Jeffrey D. Epstein, the "billionaire financier" and social pal of Presidents Trump and Clinton who was arrested on sex-trafficking charges as investigators raided his Manhattan apartment last week, get to be so rich?

Epstein has told interviewers that he managed private fortunes for rich people, which raised the usual skepticism on Wall Street, given the lack of detailed public records of his clients and performance.

From his prison cell at Fort Dix and later in a string of legal actions, Epstein's former boss, Steven J. Hoffenberg, has for years claimed a simpler explanation. Hoffenberg alleges that Epstein kept the proceeds from Towers Financial Corp., the vast 1990s Ponzi scheme that landed Hoffenberg a 20-year sentence and an order to repay nearly half a billion dollars - more like $1 billion by now, with interest.

In a string of lawsuits filed by Hoffenberg, and most recently by a pair of Towers investors citing Hoffenberg's claims, Epstein is described as the "unindicted co-conspirator" that federal criminal prosecutors referenced but never filed charges against in the Towers case. That was how 200,000 Americans lost that half billion buying Towers' uninsured high-interest-rate securities, most of which was never recovered.

Epstein's lawyers say Hoffenbgerg's claims are untrue, the alleged fraud occurred too long ago for a civil lawsuit, and that Hoffenberg, has no standing to sue to get investors' money back. Hoffenbueg sent to prison in 2002 and released in 2013 from the lock-up at Fort Dix in Burlington County for orchestrating the Tower fraud.

After Epstein's legal team, headed by New York-based lawyer Frank R. Schirripa, threatened to seek sanctions and costs for the latest attempt to resurrect Hoffenberg's claims in a civil lawsuit, the Tower investors last November withdrew their case, preserving the right to re-file later.

Even so, you can expect to hear more about Hoffenberg's allegations now that Epstein is back in the news, and powerful people worry their names might show up on the guest lists at Epstein's teenaged sex parties. Fueling stories are the controversial Florida legal settlement that put Epstein into a kind of work-release program for a year, and this week, the New York investigation, which arrested Epstein Saturday at Teterboro Airport.

Indeed, as I read the Hoffenberg cases these past two days, his allegations were referenced in a Wednesday New York Times story, and repeated by Hoffenberg in a Quartz article.

Here's what Hoffenberg has alleged:

Hoffenberg was chief executive at Towers from 1975 to 1993, hiring Epstein as his fulltime assistant and to raise capital. Hoffenberg says both men freely appropriated clients' money as their own, and ran illegal deals to make more.

For example, in 1987 to 1988, Hoffenberg alleged, Epstein ran "a scheme" to finance takeovers of Pan American Airways Inc. and Emery Air Freight Corp., using cash from a pair of Illinois insurance companies that Tower had promised regulators it would keep solvent. The deals failed. The insurers lost their capital; Illinois sued on behalf of the public, which was forced to bail out failed insurers.

The SEC brought civil fraud charges - against Hoffenberg as head of the company. Federal prosecutors followed with a fat fraud case. In 1997 he was convicted and sentenced to 20 years, plus restitution.

With Hoffenberg locked up in the Pinelands, Epstein went on with his jet-set parties, and also set up a Caribbean-based hedge fund, which Hoffenberg has since alleged that Epstein "created entirely with all of the fraudulently acquired money from Towers."

In 2001 and 2003, Hoffenberg sued law firms involved in the Towers case, which he claimed had wrongly benefited from Towers' ill-gotten gains. Federal judges tossed both complaints. In 2013 he sued the federal government, on behalf of his own victims, for not doing more to help get their money back. This time, the judge threatened his lawyer with sanctions for a "frivolous" action, and Hoffenberg withdrew.

Out of prison, now in his 70s, Hoffenberg picked up the legal trail. In 2015 he filed a petition in federal court naming Epstein as the previously unnamed "co-conspirator" cited in the federal cases against Hoffenberg's Ponzi schemes.

In 2016 Hoffenberg filed suit to impose a "constructive trust" on Epstein's businesses, which his lawyers said under New York law would enable them to seize Epstein-controlled funds and send them to the Tower victims. After Schiraldi and his team complained that complaint was time-barred and Hoffenberg lacked standing, Hoffenberg withdrew it, with prejudice - an agreement not to file it again, but also a prelude, sometimes, to a class-action suit.

And, sure enough. last summer, two old Tower investors, Marvin Gerber and Kalma Koenig, sued Epstein again, referencing Hoffenberg's allegations. They added an affidavit signed by Hoffenberg himself, alleging that Epstein "continues to hide and refuses to identify the assets and funds" that he improperly kept; that Epstein got a CPA to falsify Towers' financial statements; and that federal prosecutors "offered me a reduced sentence in exchange for information about Epstein's role," before his own sentencing. He refused.

Instead, Hoffenberg in his affidavit brags that he has, since going to prison, made an "effort to expose Mr. Epstein's fraudulent Ponzi schemes," which, he alleges, Epstein "continuously conceals" from banks and current clients so that "Epstein has remained free and has used and benefited from the ill-gotten gains he amassed as a result of his criminal and fraudulent activities."

Which raises a big honking question: If Epstein was guilty, too, why didn't Hoffenberg rat him out and maybe shave years off his own sentence?

"The judge asked me the same question. I couldn't answer that," Gary Baise, one of Hoffenberg's lawyers, told me, laughing. He noted Hoffenberg's efforts to pursue Epstein included "helping the Miami Herald" in its reporting investigation of Epstein's sex cases. "He's been like Inspector Clouseau," Baise added, laughing again.

Where are the facts? "Noticeably absent" from Hoffenberg's allegations "are any details of who said what to whom, when," Epstein's lawyers noted caustically in their response to the 2018 lawsuit.

"This action is just Hoffenberg's rehashing of several of his prior lawsuits aimed at harassing" Epstein and his businesses "by falsely accusing defendant Epstein of being the so-called co-conspirator." Again, they call for sanctions.

How about that? I asked Baise. He noted Epstein has had high-powered attorneys - Clinton prosecutor Kenneth Starr, and Harvard Professor Alan Dershowitz, among others.

Another basic question: Why would the SEC really let a big fish like Epstein go after helping the Justice Department put his partner away?

Actually, the SEC's lame history may be what gives Hoffenberg's allegations any public traction at all.

The SEC can be very diligent about going after garden-variety family-gossip insider-traders, or unregistered brokers who try to sell shares in their pipe-dream small businesses.

But it sometimes seems to give the powerful the benefit of the doubt.

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