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Financier Jeffrey Epstein is an accused sex trafficker. This much we know. The new SDNY investigation will hopefully cure the bogus plea deal Epstein received in Florida at the direction of then-U.S. Attorney Alex Acosta, who is now an ex-secretary of labor due to negative publicity finally catching up to the deal and rubbing off on President Trumps administration.
But where did Epsteins money come from? Where does it go? There are plenty of media reports suggesting that Epstein ran his own hedge fund after leaving Bear Stearns but no one seems to know who his clients were beyond retail king Les Wexner, nor whom he traded with. One report even suggested that Epstein might have belonged to intelligence.
Well, even spies are required to pay their taxes.
The bare-bones financial statement provided to the Federal Court in Manhattan on Monday, which summarized Epsteins wealth, left out a whole lot of detailfrustrating the prosecutors but tantalizing the rest of the world. According to his lawyers, Epstein is half a billionaireworth in excess of $500 million. Lots of cash, equity investments and properties (including offshore in the U.S. Virgin Islands) were outlined, but no real detail was included that could explain the piles of cash" and dozens of diamonds found in his safe by FBI agents during a raid on his $77 million Upper East Side mansion.
Nor was much explanation provided for the passport found in the safeissued by Austria with a Saudi address, and bearing Epsteins photo but containing a different name. Police have not confirmed whether the passport is legitimate or fake; Epstein's lawyers say it was just for protection against hijacking.
The Daily Beast has previously reported on Epsteins supposed multimillion-dollar investment in a modeling agency called MC2, run by his associate Jean-Luc Brunel, which allegedly sourced models from Europe. (Brunel has denied that Epstein helped fund his agency.) Epstein is also alleged to have secretly invested $1 million in an Israeli tech start-up originally called Reporty Homeland Security Ltd. but now called Carbyne Ltd. Former Israeli Prime Minister Ehud Barak is the chairman of Carbyne Ltd., which purports to develop call-handling and identification capabilities for emergency response services. Carbyne Ltd. has offices and employees throughout South America and just opened offices in Mexico. Israel's current prime minister, Benjamin Netanyahu, was quick to attack his rival Baraks association with Epstein, raising questions not only about Carbyne Ltd. but also queries about a 2004 transfer of $2.3 million from the Wexner Foundation, apparently made by Epstein to Barak for murky reasons.
Barak claimed the Wexner transfer was for research purposes and that Carbyne Ltd. was a legitimate business that had paid all its taxes.
Did they? Did Epstein? Given the immense unexplained wealth accumulated by Epstein, authorities will surely give serious consideration to exploring the money trails via a criminal tax fraud and/or money laundering investigation.
Professor Thomas Volscho, who has been researching Epstein for a book he is writing, explained to me in an email that he believes Epstein advised wealthy clients on sophisticated tax shelters when Epstein worked at Bear Stearns. Volscho further noted that Epstein controlled tons of entities (LLCs). LLCs stands for Limited Liability Companies, which are also known as shell companies used by sophisticated real-estate investors to purchase luxury real properties in an anonymous fashion. They are also used by money launderers as conduits to move monies around offshore without attracting undue attention from the authorities.
Michael Cohen most famously made use of a shell company LLC called Essential Consultants as a secret conduit to conceal hush money payments from Donald Trump to porn star Stormy Daniels. Paul Manafort also famously made use of offshore shell companies and bank accounts in Cyprus and other locations to make covert luxury purchases in the States.
If a federal agent came to me and requested authorization to open up a criminal tax and/or money laundering investigation regarding Epsteins unexplained cash and diamonds as well as his alleged concealed investments into MC2 and Carbyne Ltd. with concomitant concealed income streams, I would likely approve.
The investigation into Trump-connected lobbyist Manafort might serve as a blueprint for such an investigation. Obviously, all bank and equity accounts would require subpoenas and spreadsheet analysis. But requests for personal tax returns with an emphasis on Schedule B for analysis would be a mandatory cross-reference. Schedule B on the 1040 form contains the famous three Yes/No questions that Manafort lied about with regard to foreign bank account ownership and activity. FinCEN databases would also need to be queried.
First and foremost, all Suspicious Activity Reports (SARs) would need to be scrutinized. FinCEN had over 20 SARs on Manafort in their database regarding his suspicious foreign bank account activities using shell companies. What might this database reveal concerning Epsteins foreign financial transactions? Is there a SAR existent with regard to the 2004 wire transfer to Ehud Barak? Are there other SARs available regarding suspicious foreign bank account activity in recent years by Epstein?
How did Epstein get his million-dollar investment in Carbyne to Barak? Wire transfer to Baraks LLC in Israel? Did Epstein file the required foreign bank account record (FBAR) with FinCEN? Manafort ended up pleading to multiple counts of FBAR felonies after he was caught lying to his accountant(s) about not being required to file. Does FinCEN have any FBARs on record for Epstein with regard to his foreign financial transactions? And if not, why not?
Does the IRS have Foreign Account Tax Compliance (FATCA) files available on Epstein that might inform with regard to Epsteins foreign financial transactions?
Have local New York and Florida banks filed Currency Transaction Reports (CTRs) with FinCEN regarding cash deposits and/or withdrawals by Epstein that might explain the tons of cash found in his safe?
A careful FinCEN database query on each of Epsteins four potential co-conspirators from his Florida plea deal might also be fruitful. Certainly, queries should also be made for any names associated with Epstein such as the alleged alias on his Austrian passport.
Hedge fund operators, spies, and sex traffickers are all supposed to pay their taxes. The above financial investigative steps would be recommended to the SDNY in the case of Jeffrey Epstein, whatever the mysterious or potentially nefarious source of his income might be.
Martin Sheil is a retired supervisory special agent, IRS Criminal Investigation. You can contact him at firstname.lastname@example.org.