Liquid Funding Ltd. was a Bermuda-incorporated special-purpose vehicle that Bear Stearns created in October 2000 to fund mortgage- and asset-backed inventories with short-term paper. Jeffrey Epstein took the chair on November 9, 2001 and stayed until March 2007, during which the conduit's assets swelled to roughly $6.7 billion.
Bear Stearns Bank plc in Dublin managed the portfolio, and filings show frequent repo and note transactions with Wall Street counterparties. When the asset-backed commercial-paper market seized in 2007, ratings agencies slashed the program and portions of its collateral flowed into the Federal Reserve's 2008 Maiden Lane rescue of Bear Stearns. The company entered members' voluntary liquidation in November 2015.12345
Timeline
Incorporation and Purpose (2000)
Bear Stearns registered Liquid Funding Ltd. in Bermuda on October 19, 2000, using Appleby Services as corporate secretary.18 WIPO records show that Bear Stearns had already trademarked the name "Liquid Funding" for financial services, underlining its plan to run the conduit as a branded liquidity engine.19
Governance and Epstein's Role (2001-2007)
ICIJ's Paradise Papers list Epstein as both chairman and director from November 9, 2001 through March 30, 2007, while other board seats rotated among Bear Stearns executives and outside directors.2021 A Miami Herald review of the leaked Appleby files reported that Bear Stearns initially owned 40 percent of the vehicle, giving Epstein an influential but not controlling stake.22 Wall Street On Parade later documented support functions supplied by JPMorgan and law firm Sidley Austin.23
Funding Model and Growth (2002-2007)
Liquid Funding issued asset-backed commercial paper and medium-term notes that were bought by money-market funds; Fitch tracked the program under its "market-value ABCP" universe and, by May 2007, reported $6.7 billion of outstanding liabilities.2425 SEC schedules show the conduit appearing as a counterparty in repo deals (e.g., CT LF Funding) and in money-market portfolios holding its paper.2627
Stress, Downgrades, and Federal-Reserve Backstop (2007-2008)
The August 2007 freeze in ABCP markets forced Fitch and Moody's to cut Liquid Funding's short-term ratings, citing margin-call risk on mortgage collateral.2829 As Bear Stearns unraveled in March 2008, Liquid Funding's mortgage and ABS pool was among the assets transferred into the Fed-financed Maiden Lane LLC, according to contemporaneous Bear-Stearns rescue documentation and subsequent investigative reporting.3031
Post-Crisis Operations and Dissolution (2008-2015)
After Bear's collapse, JPMorgan absorbed Bear Stearns Bank plc, which had acted as Liquid Funding's investment manager, and wound down remaining positions.32 OffshoreAlert filings show shareholders voting for a members' voluntary liquidation on November 25, 2015, closing the entity with no outstanding claims.33
Liquid Funding gave Bear Stearns—and Epstein—direct access to low-cost, off-balance-sheet leverage during the housing boom, converting mortgage warehouses into tradable short-term paper.34 Epstein's chairmanship added a thin layer of governance to a $6.7 billion conduit whose risk ultimately migrated to the Federal Reserve and, by extension, taxpayers.3536
This highlights the fragility of pre-crisis financing structures and the opaque roles played by offshore vehicles in Wall Street's liquidity chain.3738