The origins of Jeffrey Epstein’s financial empire remain a mystery to even billionaires. But the investor’s former Wall Street mentor has one theory about how Epstein amassed his fortune: Fraud.

In a phone interview with Observer, Steven Hoffenberg alleged 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.

SEE ALSO: Victoria’s Secret Founder Loses $53M Over Ties With Jeffrey Epstein

“Its a very simplistic financial fraud that he concealed from everybody that gave him tainted money,” said Hoffenberg. “He 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’s a securities fraud because when you take money from people, you have to tell them your history.”

Hoffenberg oversaw Towers 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, a lawsuit filed last year by former Towers investors lists the financier as “an uncharged co-conspirator,” and alleges he “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.”

“If Jeffrey Epstein was 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,” Jeff Sonn, a securities attorney and founder of Sonn Law Group, told Observer. “The 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’t do so.”

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.

“His 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’s never disclosed to the investors that provide the money to Deutsche Bank his true legacy, that’s securities fraud,” said Hoffenberg. “And that makes the government available to seize all his money, literally all his money. He’s not going to be able to use his money because it’s got to go to a restitution fund because it’s tainted money.”

Representatives for Deutsche Bank declined to comment. An attorney for Epstein did not respond to Observer’s inquiry.

Long considered an investment platform for the rich and powerful, Deutsche Bank has been plagued with scandals since the 2008 Financial Crisis. In 2017, the bank reached a $7.2 billion settlement with 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.

Last week, Deutsche Bank announced it would cut 18,000 jobs and downsize its investment operations.