Analysis: Epstein May Have Never Owned A Hedge Fund Or Been A Billionaire

JuliaGlazer

When he heard about Jeffrey Epstein’s lavish parties and lifestyle, president of Seabreeze Partners Management Douglas Kass was intrigued. He wondered how such an obscure person could have made so many billions of dollars without leaving much of a trail.

According to The New York Intelligencer, Kass began to ask around on Wall Street. He said, “I went to my institutional brokers, to their trading desks and asked if they ever traded with him. I did it a few times until the date when he was arrested,” he explains. “Not one institutional trading desk, primary or secondary, had ever traded with Epstein’s firm.”

Kass continued to wonder, “How did he get the money?”

When the Intelligencer spoke to other hedge fund managers, many expressed doubt that Epstein has made his money by being a traditional money manager. One fund manager says, “it’s hard to make a billion dollars quietly.” Still, Epstein made no waves in the world of finance.

Kass could not find any of Epstein’s investors besides Les Wexner, a very publicized client of Epstein’s. Investors are a key part of a successful hedge fund. A hedge fund manager notes, “I don’t know anyone who’s ever invested in him.”

Epstein does not have family money and never graduated from college. He became a teacher at a private school and throughout the 1980s, worked at investment bank Bear Stearns. He quickly became a partner of the firm and not soon after that, he left the firm. Epstein allegedly left his job after a minor securities violation.

Soon after, Epstein began his own hedge fund, J. Epstein & Co., which was later renamed Financial Trust Co. He claimed that he would only work with billionaires and that he did all of the investing himself and his 150 employees worked in the back office. While researching a book on Epstein, sociology professor Thomas Volscho found a disclosure form from 2002 revealing that the firm had only 20 employees.

These many strange aspects of Epstein’s story have left many hedge-fund managers to speculate that Epstein was running something closer to a blackmail scheme rather than a hedge fund.

Epstein’s fund is based in an offshore tax haven, the U.S. Virgin Islands. That along with the secret client list make the blackmail scheme theory seem more plausible.

Read the full story here.

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