Plaintiffs file new complaint against registered sex-offender Jeffrey Epstein for losses in decades-old $475M Ponzi scheme
In 1995 Steven Hoffenberg pleaded guilty to bilking investors of almost half a billion dollars in one of the worst Ponzi schemes in history — he paid a $60 million settlement and spent 18 years in jail. In 2016 Hoffenberg attempted to reclaim money for Ponzi victims from his ex-associate Jeffrey Epstein. And in June 2016 Hoffenberg launched a Super PAC to elect Donald Trump. Now Hoffenberg’s allegations are part of a new class action attempt to recover hundreds of millions of dollars from Epstein.
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Last week law360.com reported a new class action complaint filed in New York federal court on August 21, 2018 against Jeffrey Epstein for his alleged role in a Ponzi scheme that ran from 1987 to 1993 and cost investors $475 million.
Court filings show that the complaint filed by two investors on behalf of themselves and others, includes an affidavit signed by Steven Hoffenberg that names Jeffrey Epstein as a co-conspirator in the Ponzi scheme that landed Hoffenberg in jail for 18 years. The Ponzi scheme had involved selling investors bonds, notes and securities to cover prior business losses and to fund the lavish lifestyles of Hoffenberg and, allegedly, of Epstein as well.
The action was filed to recover damages from Epstein and three companies he used to “conceal his ill-gotten gains.” The plaintiffs demand a trial by jury to determine compensation for various damages, and they estimate that the $475 million owed in restitution along with 20 years accrued interest, is now valued at approximately $1 billion.
This new complaint is the latest installment in a saga that started over three decades ago when Steven Hoffenberg and Jeffrey Epstein first met and bonded over their reported obsession with making money. Since then one became an ex-felon and the other became a registered sex-offender. And, like the over-used trope of Russian nesting dolls, there’s a story tucked within this story, of a newly reported series of bizarre events in 2016 when Hoffenberg and a new business partner announced plans to take over $1 billion from Epstein and simultaneously launched a Super PAC to elect Donald Trump president. The Super PAC filed an FEC receipt for a $50 million in-kind contribution — that appears to be yet another fake scheme.
Steven Hoffenberg hired Jeffrey Epstein in 1987
From early in his career Jeffrey Epstein seemed to have a knack for skirting trouble with little or no repercussion. Epstein worked at brokerage firm Bear Stearns but left abruptly in 1981. According to SEC filings and legal documents reported in a 2003 Vanity Fair expose on Epstein, he departed Bear Stearns as the SEC was looking into insider trading in an acquisition deal involving the Bronfman family’s Seagram Company. The SEC was tipped off that Epstein had information on insider trading and questioned him about it — but the SEC never charged Epstein or anyone at Bear Stearns.
A few years later in the 1980’s Steven Hoffenberg met Jeffrey Epstein in London and the two bonded over their appreciation of lavish lifestyles and an obsession with making money. According to sources Hoffenberg’s Tower Financial Corporation hired Epstein in 1987 and paid him $25,000 per month. Epstein worked on several deals including “doomed bids to take over Pan American World Airways in 1987 and Emery Air Freight Corp. in 1988.”
When Hoffenberg started to encounter legal and regulatory troubles in the late 1980’s, Epstein formed a new alliance with Leslie Wexner, the billionaire founder of The Limited Brands, which included Victoria’s Secret, Express, and Bath & Body Works. Epstein moved on and continued to build his wealth and prestige while Hoffenberg took a steep fall.
In 1994 Hoffenberg was arrested on charges of securities fraud and obstruction of justice. In 1995 Hoffenberg pleaded guilty to defrauding investors of almost half a billion dollars by operating one of the largest Ponzi schemes on record through his company Towers Financial Corporation. Hoffenberg ended up paying a $60 million settlement to the SEC, a $1 million fine, and spent 18 years in prison.
Although Hoffenberg’s conviction was based in large part on business related to the Pan Am and Emery Air deals that Jeffrey Epstein had worked on, Hoffenberg did not name Epstein at the time as a co-conspirator.
While Epstein skirted business troubles from his work for Hoffenberg, his lifestyle pursuits partly caught up with him and in 2008 Epstein pleaded guilty to soliciting an underage prostitute, spent 13 months in jail and became a registered sex offender.
Various legal documents have described accusations much more serious than Epstein’s 2008 conviction, including ‘loaning’ out underage girls to rich and powerful men, in part for the purpose of obtaining potential blackmail material. And there have been legal allegations by former victims that federal prosecutors in Florida violated the rights of dozens of teenage victims by secretly negotiating favorable terms for Epstein.
While Epstein continues to face legal issues related to allegations involving minor girls, he now also faces the new complaint that includes financial allegations made by his former employer Steven Hoffenberg. The two men who once bonded over their desire to make money are now foes, but they still share several things in common: notoriety for financial and sexual crimes — and ties to Donald Trump.
Epstein, Hoffenberg and Donald Trump
Jeffrey Epstein has ties going back decades with many famous and powerful men, including Bill Clinton, lawyer Alan Dershowitz and Prince Andrew. And none are now more famous, or arguably more powerful, than U.S. president Donald Trump. In a New York Magazine article in 2002, Trump boasted of his friendship with Epstein:
“I’ve known Jeff for fifteen years. Terrific guy,’’ Trump booms from a speakerphone. “He’s a lot of fun to be with. It is even said that he likes beautiful women as much as I do, and many of them are on the younger side. No doubt about it — Jeffrey enjoys his social life.”
In 2017 Politico reported on a civil lawsuit by Virginia Giuffre who claimed that two decades ago when she was 15 and working as a towel girl at a Palm Beach resort, she was recruited into sexual slavery by socialite Ghislaine Maxwell, who was Epstein’s girlfriend at the time. The resort where Giuffre had been working as a towel girl when Maxwell recruited her, was Donald Trump’s Mar-a-Lago resort, which has since hosted visits by important US allies and world leaders. The story notes that “a lawyer for Trump says the president was unaware of any wrongdoing by Epstein.”
Of the many sexual assault allegations made against Donald Trump prior to his election, the most disturbing accusation was made by a woman referred to as Jane Doe in a lawsuit filed in 2016 against Trump and Jeffrey Epstein that accused both men of raping her in 1994 when she was only thirteen years old. A lawsuit filed in California was apparently dismissed over technical reasons in May 2016 and was refiled in New York and then dropped in November 2016 after the woman known as Jane Doe received threats and decided not to come forward. Trump maintains that the accusation is false.
Steven Hoffenberg has a less sordid history with Donald Trump. Before his arrest, Hoffenberg had been a tenant of Trump Tower which has been home to celebrities, gamblers, convicts and members of the Russian mafia. After he was released from prison and married in 2014, Hoffenberg showed his fondness for Trump by taking wedding photos in front of Trump Tower. In 2016 Steven Hoffenberg pursued his most pro-Trump effort yet — launching a Super PAC to elect Donald Trump president.
Hoffenberg Launched a Super PAC for Trump
The announcement that Steven Hoffenberg was launching a super PAC in early 2016 barely made a blip on the radar in the news storm that swirled around the Trump campaign.
The Washington Examiner published a short piece in May 2016 on the Get Our Jobs Back Inc. PAC and the plans of the PAC’s CEO Steven Hoffenberg to raise over $1 billion for presidential candidate Donald Trump.
In June the PAC filed an FEC expenditure report that noted a $50,000,000 In-kind contribution from Statware, Inc. at 90 Main Street, Centerbrook, CT, for the purpose of Digital Media Marketing, Revenue Sharing, on behalf of ‘Trump J. Donald’.
An ‘in-kind’ contribution is defined by the FEC as gifts of goods or services, such as consulting, donations of office supplies or mailing lists, sponsoring fundraising events, or payments for advertising on behalf of a candidate.
Politico published a June 2016 story describing the donation from Statware:
“Statware Inc. was making an in-kind donation of services worth $50 million. The PAC listed the services as “Digital Media Marketing, Revenue Sharing,” though there’s little evidence yet of such a campaign.
Statware Inc. is a private company based in Centerbrook, Connecticut, that advises financial brokers on issues related to sensitive or proprietary data. According to its website, the firm does not have outside investors and operates “without distraction or undue outside influences.”
Hoffenberg issued a June 21, 2016 press release announcing that the new Trump Super PAC called Get Our Jobs Back Inc. planned to collect $0.99 donations to fund a $50 million digital marketing campaign. The press release also included a statement from PAC spokesman Theodore Fotsis, who was listed as the media contact and as Chairman/CEO of WHAM Inc.
Statware Founded by Richard Lepoutre
According to the Statware website the company that made the in-kind contribution to Hoffenberg’s Super PAC is a “wholly-owned, private Connecticut Corporation doing business exclusively in the list industry since 1984. Statware has no outside investors and is able to direct and focus its attention entirely on the needs of the list industry without distraction or undue outside influences.” Statware founder and President Richard A. Lepoutre, is described as “a 30 year veteran of the list industry. His career includes several years at Direct Media, Inc. and as Founder and President of Statlistics, Publishers Marketing Group and Statware.”
Richard LePoutre’s LinkedIn page lists a wide range of experience with marketing and direct mail companies. LePoutre is also listed as the founder of various conservative, military-related, and anti-porn or sex-trafficking organizations including: Founder of CauseACTION, Co-Founder of The March of Honor Campaign, credit as Executive Producer of the Honor Bound Trailer, Co-Founder of the Stop Child Porn on Facebook Campaign, and Co-Founder of MenAPAT/Men Against Prostitution and Trafficking.
It is not clear how Richard LePoutre met Steven Hoffenberg or how he came to agree to make a $50 million in-kind contribution to the Get Our Jobs Back Inc. Super PAC. And there is no evidence the in-kind contribution was ever made.
WHAM Inc. Briefly Acquired Hoffenberg’s Businesses
What was not made clear in the sparse news coverage about Hoffenberg’s Get Our Jobs Back, Inc. Super PAC for Trump and the Statware in-kind contribution, was that earlier in 2016 the company WHAM Inc. and CEO Theodore Fotsis agreed to acquire Hoffenberg’s businesses, making WHAM Inc. the owner of the Super PAC. However, this business agreement only lasted a few months and right before the election in early November 2016, WHAM Inc and Fotsis ended their agreement with Hoffenberg.
A February 2016 news release had stated that Theodore Fotsis, CEO of penny-stock company WHAM Inc. planned to acquire Steven Hoffenberg’s NYPP (New York Post Publishing — not related to Rupert Murdoch’s New York Post) and it’s holdings including Towers Investors.com.
The quarterly report filed for WHAM Inc. for the period through March 31, 2016 included more details on the February news release and described the binding agreement to acquire Hoffenberg’s businesses including NYPP and Towers Investors.
The March 31, 2016 filing stated that WHAM, Inc. was authorized to issue 500 million shares in addition to approximately 265 million shares already outstanding. As part of the deal with Hoffenberg, his company New York Post Publishing received almost 146 million shares, which had voting rights equal to 55% of outstanding voting shares. At the time of the announcement of the binding agreement, the WHAM, Inc. stock price for the public float appears to have been listed as $0.079. However, outside of the WHAM filing, there is no clear evidence that the stock was actually issued to Hoffenberg.
In March 2016 WHAM Inc. also bought construction company American Services Inc. (ASI). The announcement was made by Theodore Fotsis CEO of WHAM Inc., Steven Hoffenberg CEO of Towers Investors, and Alan Fraade, General Counsel at The Mintz Fraade Law Firm — the same firm that represented Hoffenberg when he launched the Super PAC.
The WHAM Inc. deal to acquire Hoffenberg’s businesses was announced along with another unusual plan that involved convicted sex-offender Jeffrey Epstein.
The February 2016 release that announced the WHAM/Hoffenberg deal also announced a bigger more bizarre plan — a binding agreement for WHAM Inc. and CEO Fotsis, along with Hoffenberg’s NYPP, to take over “Jeffrey Epstein’s Billions in Order to Pay the Towers Investor Victims.”
A different February 2016 press release included additional details and noted that “WHAM INC. now owns the collection contract for the billions of dollars due by Epstein.” The release which noted that “Jeffrey Epstein owns Financial Trust Corporation operating out of Saint Thomas” included a Q and A, which had such lively comments as this one:
“Q: Does Jeffrey Epstein have to pay back the Billion of Dollars of debt owed to the Tower Investor victims under the complex WHAM INC. takeover, which was signed last week?
A: Yes!”
A Letter of Intent signed February 2, 2016 by Steven Hoffenberg and Theodore Fotsis includes a section on Jeffrey Epstein, noting “it is contemplated that the Financial Trust Company” and “Jeffrey Epstein” based on TFC’s (Hoffenberg’s Tower Financial Corp.) investment with Epstein and the Trust shall provide a minimum of one billion dollars in assets to the Company.
There is no indication in the WHAM/Fotsis and Hoffenberg agreement to acquire Jeffrey Epstein’s one billion dollars that Jeffrey Epstein actually knew about or agreed to the deal.
The bizarre announcement almost had the feel of a hostile takeover, where the plan of the acquiring party was made without the consent or possibly even the knowledge of the target of the acquisition.
And then a few months later, May 2016, Hoffenberg filed a civil lawsuit against Jeffrey Epstein accusing him of helping Hoffenberg defraud investors. The lawsuit was later withdrawn with prejudice. But it appears that the plan announced for WHAM Inc. with Hoffenberg to take over Epstein’s billions may have been announced in coordination with the lawsuit Hoffenberg filed a few months later against Epstein.
It’s not clear if WHAM Inc.’s CEO Theodore Fotsis and Steven Hoffenberg realistically thought they could reclaim some of Jeffrey Epstein’s money, or if they intended to try to raise funds from other investors or Super PAC contributors based on their grand plans. However, all of their news releases seem far reaching and unbelievable and beg the question around what the real intent was for their partnership and the Super PAC activities.
An August 2016 press release noted that Hoffenberg’s Tower Investors.com, which managed the Trump Super PAC at Get Our Jobs Back, Inc., was a fully-owned subsidiary of WHAM, Inc. The press release described the fantastical plan for the new PAC to wipe out all US student loan debt for 43 million college student loans — a debt of 1.37 trillion dollars. Part of the plan included a Christ credit and debit card system, part of a faith-based credit card company, to be marketed to churches throughout the US. WHAM projected issuing 10 million credit cards, and making a fortune of $500,000,000 for investors. A related PR Newswire press release was briefly hosted on yahoo.com/news but was later removed.
While there has been no reporting up until now about WHAM Inc., Fotsis and Hoffenberg in the media, a July 2016 blog post by Tom Aswell on the Louisianavoice.com summarized many of the highlights of Steven Hoffenberg’s connections to Jeffrey Epstein and to WHAM Inc. based on some of their mid-year news releases.
In another odd story — the same month the Get Our Jobs Back PAC was launched, WHAM, Inc.’s June 2016 consolidated financials noted two contracts “for performance based consulting services with third‐parties” with future revenue of $113,000,000. Revenue for the same period was $463,595, making the two contracts worth $113 million a complete anomaly. None of WHAM Inc.’s financials after June 2016 referenced the two contracts or the potential $113,000,000 again.
In October the Super PAC Appears to Implode
An FEC Form 99 filing dated on the top right October 7, 2016 indicated that all elements of the Super PAC were in dispute, noting 1) the $50 million transaction is under investigation for unlawful acts by Statware Inc. to damage the Super PAC donations, 2) the investigation shows Statware lied to the Super PAC, and 3) the Super PAC fired and claimed malpractice against its law firm Mintz Fraade.
A 2017 New York Post article about unrelated work done by Alan Fraade from the law firm Mintz Fraade has the headline “Lawyer accused of misconduct has the worst name ever” and opens stating “Maybe Alan P. Fraade — pronounced fraud — should have considered a career other than law.” It appears that Hoffenberg hired a lawyer for the Super PAC who had quite a questionable reputation.
However, despite the legal items noted in October 2017, in subsequent filings Hoffenberg continued to report the $50 million in-kind contribution. For example the in-kind contribution is listed in a report filed in February 2017 for the period 04–01–2016 to 06–30–2016.
And the February 2017 cover page included hand scrawled comments noting that the Super PAC closed on November 8, 2016.
In November 2016 WHAM and Hoffenberg Part Ways
At the same time that the Super PAC closed, WHAM Inc and Fotsis parted ways with Hoffenberg.
The WHAM Inc. filing dated September 30, 2016 included a section noting that the February 2, 2016 acquisition agreement between WHAM Inc. and Hoffenberg’s NYPP was rescinded effective November 2, 2016. In addition the shares given to Hoffenberg were rescinded as well.
And then in 2017, as though WHAM Inc. wanted to distance itself further from 2016 activity, the company made two major transitions and name changes.
WHAM Inc → BERITH Holdings → Syntrol Corp
Following the strange acquisition and then divesture of Hoffenberg’s businesses by WHAM Inc. in 2016, the company quickly went through two major transformations in 2017, into BERITH Holdings and then Syntrol Corp.
A January 2017 press release about the WHAM Secure Android mobile application noted that on December 20, 2016 the company changed its name to BERITH Holdings Corporation, and WHAM Inc. CEO Theodore Fotsis, along with Russ Guzior and a few other WHAM executives, joined BERITH Holdings Corporation.
Later the same year a September 2017 quarterly disclosure statement for BERITH Holdings noted the company was acquiring Syntrol Plumbing, Heating, and Air, Inc. and the new company would “be named Syntrol Corp.”
Both Theodore Fotsis and Russ Guzior resigned from the company in September 2017. However a January 2018 Form 1A filing for Syntrol notes that Fotsis cancelled 1,000,000 shares he owned in ex-change for 1,600,000 newly issued SNLP (Syntrol) shares, so Fotsis appears to have remained a shareholder into 2018.
Theodore Fotsis and WHAM Inc.
It is not clear how Theodore Fotsis and Steven Hoffenberg met and developed the plan for WHAM Inc. to acquire Hoffenberg’s businesses, to launch the Trump Super PAC, and to attempt to take over $1 billion from Jeffrey Epstein.
WHAM Inc. is short for Woodman Holdings Asset Management — which appeared to trade under the stock symbol WFMC. According to the March 31, 2016 Information and Disclosure Statement WHAM Inc. was established in December 2001 as East Coast Distribution Corporation, which became IPMC-Europe Corporation in 2002, and became The Wholefood Farmacy Corporation in 2004, and then was renamed WHAM Inc. in 2011.
The company described its nature of business as investing in and/or acquiring early stage companies. These businesses ranged broadly, from WhamSecure Inc., described as a “Secure Mobile Encrypted Communications Solution” to A.S.I Construction Services, a “Full Service Construction Co., Specializing in Roofing.”
The Wham Inc. website on the Wayback Machine archive from June 2016 is filled with references to the Hoffenberg acquisition, the Get Our Jobs Back Inc. Super PAC, and blaring negative headlines about Jeffrey Epstein.
Relatively little is known about WHAM Inc. CEO Theodore Fotsis. The March 31, 2016 company filing describes his background, including his role as President of Honeyfield Restaurant Corp. in Lockport IL and that he studied theology at the Moody Bible Institute and Fire School of Ministry International.
A search of Open Corporates reveals a Theodore Fotsis who is the agent for two Nevada registered companies, Masadah Solutions, LLC and Sego Corporation. They were incorporated at different times in 2015 and both display their status as ‘Revoked.’
The other executive from WHAM Inc. listed in the March 31, 2016 filing is Russ Guzior, COO and Director, and his bio notes his connection to Hobby Lobby owner David Green, and a disposal and an antique and design company he runs. The bio ends by noting that Gucior has learned that a “biblically run company offers tremendous blessings and results versus a company that is not, (Romans 12:2).”
WHAM Inc. Website Domain Information
An independent researcher who wishes to stay anonymous helped uncover some interesting hosting information for the WHAM Inc. website. One change occurred in mid 2016 during the period when WHAM Inc. owned the Trump Super PAC. And a big change occurred in early 2018, well after the WHAM Inc. name had changed several times (to BERTIH Holdings and then again to Syntrol) and Theodore Fotsis had no known remaining connection to WHAM Inc. Therefore, the domain information below may have no significance other than an interesting coincidental domain connection — to a Ukrainian hosting company that appears in the Trump-Russia story.
Starting in July 2013 WHAM Inc. used whamcorp.us as its primary corporate domain name and used Godaddy and Cloudflare infrastructure for hosting and registration, both relatively standard for a small US based company.
According to the Waybackmachine archives by April 7, 2016 WHAM Inc. was redirecting its whamcorp.us domain to its new domain and was using a new corporate website located at whaminc.us. And per historical domain records this domain was hosted at the French cloud computing company OVH SAS which provides VPS, dedicated servers and other web services. The earliest resolution of the whaminc.us domain that was found was on April 4, 2016 to the IP address 167.114.211.10 controlled by the French company OVH SAS.
OVH SAS gained some notoriety in early 2017 because of its implication in a number of hacking events attributed to the Russian state-sponsored hacking group Fancy Bear.
Other than less transparency and regulatory oversight, it is not clear why a change like this would have been made in the months leading up to the 2016 US Presidential elections.
The other big change occurred on January 14, 2018 when Pavel Birjukovskis of Latvia took ownership of the domain whaminc.us. Given the historical timeline and changes to the hosting of this domain it is not clear whether Birjukovskis took ownership of the whaminc.us domain after it had expired and went back on the open market, or whether it was sold to him in a private transaction. Since that time the domain has been hosted on IP addresses controlled by the ITL Company.
The ITL company, based in Ukraine, has been prominent in the Trump-Russia story and was implicated as the hosting/network provider for the Blacktivist.info website and also leased servers to Greenfloid LLC, a Florida registered company run by Sergey Kashyrin, Iurii Udovenko and Iryna Volokhai on Staten Island. Greenfloid LLC ran the sites blackmattersus.com and DoNotShoot.Us. These BLM troll sites were outed by articles back in October of 2017 by the DailyBeast and Thinkprogress. ITL also hosted the Whoiswhos.me domain in September 2016 — a domain confirmed to have been controlled and used by the Russian Internet Research Agency and confirmed to have hosted malware. More recently the ITL company was again linked to a hacking campaign called VPNFilter (IP:217.12.202.40), which was again linked to the Russian hacking group Fancy Bear.
As noted earlier, in January 2018 when whaminc.us domain ownership moved to Pavel Birjukovskis from Latvia and was hosted on IP addresses controlled by ITL Company, there is no apparent connection with Theodore Fotsis, Steven Hoffenberg or anyone involved with the 2016 WHAM Inc. business. The move to ITL hosting may be an unusual coincidence.
Jeffrey Epstein link to SCL Group’s Alexander Nix
One final interesting note. Jeffrey Epstein has a tangential connection to Trump’s scandal ridden data company Cambridge Analytica and its CEO Alexander Nix.
Ghislaine Maxwell, who had been Jeffrey Epstein’s girlfriend and who allegedly recruited girls for him and his associates, is the daughter of late publishing magnate Robert Maxwell who had owned the Mirror Group and Macmillan in the UK. Robert Maxwell had been closely affiliated with the company Robert Fraser & Partners LLP. Journalist Ann Marlowe identified that Cambridge Analytica CEO Alexander Nix had worked at Robert Fraser & Partners, and that the firm was incorporated in 2003 by John Michael Bottomley who served as a director for several hundred companies including Cambridge Analytica’s parent company SCL Group from 2005 to 2014.
For the past few years Steven Hoffenberg appears to have jumped from one new outlandish scheme to another. The partnership he had with Jeffrey Epstein three decades ago has devolved into attempts by Hoffenberg to hold Epstein legally and financially accountable for the Ponzi scheme Hoffenberg claims they ran together. And in the midst of the pursuit of Epstein started in 2016, Hoffenberg formed a strange short-lived partnership with Theodore Fotsis and WHAM Inc., launched a Super PAC that claimed a mystery $50 million in-kind contribution to support the Trump campaign, and then everything was dissolved before the 2016 election.
These events may comprise yet more odd stories in the ever bizarre Trump-Russia saga. Hoffenberg’s exploits may be merely nothing-burgers, albeit colorful ones. Now it remains to be seen if the new complaint filed last week with an affidavit from Steven Hoffenberg against Jeffrey Epstein will have any traction.
UPDATE: There was a notice of voluntary dismissal on Oct 5, 2018 in the Case 1:18-cv-07580-JPO Marvin Gerber and Kalma Koenig v The Financial Trust Company, XYZ Corporation, ABC, Inc., and Jeffrey E. Epstein.
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