How, exactly, did accused sex trafficker Jeffrey Epstein propel himself from a middle-class boy in Brooklyn to a secretive, maybe-billionaire with multiple mansions and a private jet?

While the financial world has been puzzling over the question for years, it is really not that complicated, according to Steven Jude Hoffenberg, Epstein’s former mentor. Epstein used fraudulently gotten funds as seed money, he told Quartz.

Epstein became known in financial circles in the early 2000s for managing money for Les Wexner, the billionaire head of Limited Inc. But as Vicky Ward wrote in an extensive 2003 profile of Epstein in Vanity Fair, he earlier worked for Hoffenberg. In the late 1980s, Hoffenberg “hired his new protégé as a consultant at $25,000 a month.” They traveled the world together on Hoffenberg’s plane, Ward wrote.

In 1997, Hoffenberg—the head of bill-collection firm Towers Financial—was sentenced to 20 years in jail for running one of the biggest Ponzi schemes in US history. Thousands of investors were bilked of more than $450 million.

Hoffenberg now tells Quartz that Epstein was deeply involved in the fraud. Epstein was never charged in the case, but he was “totally in the mix,” Hoffenberg said. He added that Epstein helped him set up the Ponzi scheme.

“He was my colleague daily, seven days a week,” Hoffenberg added.

Hoffenberg said Epstein’s connection to the crime didn’t come up at the time because he pled guilty. “When you plead guilty you don’t go in for elaborate discovery.”

Hoffenberg was released from prison in late 2013 after serving almost 20 years in jail. He still hasn’t paid back most of the money he took from investors, a demand the judge included in his original sentence.

Epstein named in legal filings

Hoffenberg’s allegations are also made in a lawsuit filed in August 2018 by former Towers investors. The suit calls Epstein an “uncharged co-conspirator.” It also alleges that the millions in stolen investment was the seed capital for Epstein’s hedge fund, which it values at $50 billion. The suit says Epstein “knowingly and intentionally utilized funds he fraudulently diverted and obtained from this massive Ponzi scheme for his own personal use to support a lavish lifestyle,” but does not elaborate.

Reid Weingarten, the attorney representing Epstein, didn’t respond to a request for comment on the various allegations made against Epstein.

One exhibit filed with the court by Hoffenberg and Towers noteholders says that Hoffenberg, Epstein and Towers Financial “operated a classic Ponzi scheme from the late 1980s to mid-1990s,” which succeeded in soliciting over $500 million dollars in investments from participants. All of the money was “misappropriated for improper and personal uses,” the exhibit claims, but does not provide any substantiating evidence.

Epstein “provided services including, but not limited to, assisting Mr. Hoffenberg full-time in all matters of business operations and management of TFC [Towers Financial], including, but not limited to, raising capital as a co-conspirator in connection with the TFC Ponzi Fraud,” the exhibit claims.

Together, Hoffenberg and Epstein sold $272 million of promissory notes through six private placements, based on “bogus income and asset figures to conceal TFC’s true financial condition.” The proceeds were “used to pay TFC’s operating expenses,” the filing claims. They did the same with five private placements of $210 million of bonds, based on bogus financial information.

In October of 2018, the lawsuit was withdrawn. Hoffenberg said the plaintiffs plan to refile it. A lawyer for the plaintiffs, however, said they had no knowledge of that plan. A 2013 filing by Hoffenberg claims Epstein should pay restitution to Towers investors from his hedge fund. It was dismissed by a judge because the same law firm was representing Hoffenberg and Towers investors.

Hoffenberg added that in the 1990s, Epstein showed signs of the same predatory behavior toward girls that he was charged with on Monday (July 8).

Off the Trump team

Hoffenberg, a former Trump Tower tenant, started the pro-Trump political action committee Get Our Jobs Back in April of 2016. He said in a FEC filing in June it would conduct a $50 million marketing campaign for Trump. He “left the Trump team” after being disillusioned with their campaign tactics, he told Quartz, and particularly their reliance on Wikileaks.

“I’m off the Trump team,” he said. “I told Roger Stone and all of them not to do the Wikileaks, and no one listens.”

He became a born-again Christian while he was in prison, he told Quartz, and spent years studying the Bible at his wife’s urging. Hoffenberg said he is speaking out now to help the original investors get their money back. The 1997 judgement against him requires him to pay investors back.

“I can’t support people who blatantly break the law. My moral compass today as a born again Christian is very substantial,” he said.

Justin Rohrlich contributed reporting.