Convicted sex offender Jeffrey Epstein claims to be a billionaire hedge fund manager. But his real business may have been a blackmail scheme that could end up implicating many of his powerful friends.
"Given this puzzling set of data points, the hedge-fund managers we spoke to leaned toward the theory that Epstein was running a blackmail scheme under the cover of a hedge fund," New York Magazine reported Thursday.
The magazine spoke with multiple Wall Street insiders for the story, including Douglas Kass of Seabreeze Partners Management.
“I’m hearing about the parties, hearing about a guy who’s throwing money around,” Kass, who lives in Palm Beach, Florida. "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. Not one institutional trading desk, primary or secondary, had ever traded with Epstein’s firm.”
“How did he get the money?” Kass kept investigating.
“I don’t know anyone who’s ever invested in him; he’s never talked about by any of the allocators,” a billionaire hedge-fund manager told the magazine.
Kass was one hedge-fund manager who emailed around a Twitter thread explaining how such blackmail would work.
“This actually sounds very plausible,” former hedge-fund manager Whitney Tilson said while emailing the thread around to Wall Street colleagues.
Here is the full thread by Quantian1:
So, apologies in advance, but I want to do a quick little THREAD to explain my theory of what the Epstein story rea… https://t.co/fTxu9Fj1Ae— Quantian (@Quantian) 1562611904.0
(1/13) Let's take as our starting points two givens. (A.) You are a committed, unrepentant pedophile (B.) Because o… https://t.co/ROi3DPRRbb— Quantian (@Quantian) 1562611904.0
(2/13) The obvious route is, well, obvious: you could just be a pimp, offering underage prostitute services to very… https://t.co/1I4xReb3zh— Quantian (@Quantian) 1562611904.0
(3/13) The second level though follows instantly: You don't need to charge up front, just get them to have underage… https://t.co/yM6A82l49a— Quantian (@Quantian) 1562611905.0
(4/13) So, what to do? Well, the second idea has some merits. First, you need to recruit people in. Have lots of… https://t.co/peJzCYj71z— Quantian (@Quantian) 1562611905.0
(5/13) You don't even have to do anything, and most people invited might even be totally unaware of the real purpos… https://t.co/qw55hYwNpK— Quantian (@Quantian) 1562611905.0
(6/13) You inform him she was really 15, but you offer him a nice, neat way to buy your silence: a large allocation… https://t.co/GI5HsW1D9G— Quantian (@Quantian) 1562611905.0
(7/13) The fund is offshore in a tax haven (check) and nobody will see the client list (check). Of course, you don… https://t.co/3VthvtfXwg— Quantian (@Quantian) 1562611905.0
(9/13) A $20 million wire from Billionaire X to you with no obvious reason will raise many questions, and the IRS w… https://t.co/LWLBjI7Bdb— Quantian (@Quantian) 1562611906.0
(10/13) Because of this structure, you're extraordinarily secretive about client lists (check) because they aren't… https://t.co/WiD7vvu01p— Quantian (@Quantian) 1562611906.0
(11/13) Occasionally you may also try this trick on other people: important political figures, mayors, prosecutors,… https://t.co/JH2rBBOV3R— Quantian (@Quantian) 1562611906.0
(12/13) And, of course, the scam can be kept going as long as people are willing to pay, which is forever. If you'… https://t.co/ro9BbbwZHz— Quantian (@Quantian) 1562611906.0
(13/13) And the last piece of the puzzle is the evidence. You'd want it somewhere remote, but accessible: a place t… https://t.co/s0tLa8esLU— Quantian (@Quantian) 1562611906.0
Two small points of clarification: 1. This scheme works just as well if the billionaires are in on it from the getg… https://t.co/xAIqWvQk0Y— Quantian (@Quantian) 1562689555.0