Towers Financial

Steven Hoffenberg's bill‑collector‑turned‑investment house, Towers Financial Corp., raised more than $400 million through promissory notes and asset‑backed bonds but recycled new money to repay earlier investors, a pattern federal regulators later described as a classic Ponzi scheme.¹²

Investigators moved in during February 1993, the company filed for Chapter 11 a month later, and Hoffenberg pleaded guilty in April 1995; in March 1997 Judge Robert W. Sweet handed him a 20‑year sentence, a $1 million fine and $463 million in restitution, of which he served eighteen years before his 2013 release.³²⁴

Jeffrey Epstein, whom Hoffenberg put on a $25000‑per‑month retainer in 1987 to chase takeover targets such as Pan Am, was described by his former boss as the "architect of the scam," yet his name vanished from the criminal docket and he was never charged over Towers Financial.⁵⁶

Roughly 200 000 note‑holders lost life savings, making the case the largest U.S. investor fraud of its era until the Madoff scandal.⁶

  Timeline

  Hoffenberg / Epstein Relationship

  Towers Financial Corporation

Originally a Manhattan debt‑collection agency incorporated in Delaware, Towers pivoted in 1988–1992 to raise capital by issuing high‑yield notes and $210 million in healthcare‑receivable bonds through five special‑purpose subsidiaries.¹ SEC civil charges arrived on Feb 8 1993, alleging misstatements under Securities Act § 17(a) and Exchange Act § 10(b); the company sought bankruptcy protection in March 1993.¹⁰¹ Subsequent SEC releases detailed auditor misconduct and follow‑on frauds aimed at claw‑back pools for victims.¹¹¹²

  Steven Hoffenberg

Born 1945 in Brooklyn, Hoffenberg built Towers, briefly owned the New York Post in 1993, and lived lavishly off investor funds.¹³ He admitted five federal counts—securities fraud, tax evasion, obstruction—in 1995.² The 20‑year sentence (United States v. Hoffenberg, 94‑Cr‑213 & 95‑Cr‑321) became a reference point for major fraud penalties.⁴ After release he publicly accused Epstein of being an uncharged co‑conspirator.⁵ Hoffenberg was found dead in Derby, Connecticut, on Aug 23 2022, aged 77.⁹

  Jeffrey Epstein and Towers

Hoffenberg hired Epstein in 1987 after an introduction by arms broker Douglas Leese, paying him $25 000 a month and forgiving a $2 million "loan."⁵⁶ Press releases filed with the SEC during Towers' failed Pan Am raid listed Epstein as the financial adviser on the bid.¹⁴

Victim and prosecutor accounts later portrayed Epstein as the strategy mind behind investor solicitations, yet his name disappeared from indictments once Hoffenberg pleaded out.⁶

  Aftermath and Significance

The SEC and bankruptcy trustee have pursued recovery actions for decades, but victims have recouped only fractions of their losses, in part because key assets were spent long before regulators intervened.¹²¹ Towers Financial's collapse became the template regulators cite when explaining the mechanics of large‑scale receivable‑based Ponzi schemes and remains a benchmark in sentencing discussions for financial fraud.⁴¹¹

This dossier brings together the primary court filings, SEC actions and major press investigations to present a clear picture of the fraud, its architects and the lasting damage felt by investors.

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  References

  Footnotes

1. SEC: Towers Financial Corp. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶

2. Hoffenberg Guilty, LA Times ↩ ↩² ↩³ ↩⁴

3. SEC: Michael Rosoff Release ↩ ↩²

4. US v. Hoffenberg, Justia ↩ ↩² ↩³ ↩⁴

5. Epstein at Towers, CBS News ↩ ↩² ↩³

6. Epstein Evasion, Washington Post ↩ ↩² ↩³ ↩⁴ ↩⁵

7. SEC News Digest, 1994 ↩

8. Hoffenberg Found Dead, AP News ↩

9. Hoffenberg Dies, Washington Post ↩ ↩²

10. SEC: Leslie Danish Proceeding ↩

11. SEC News Digest, 1995 ↩ ↩²

12. SEC: Hall, Ciniero, Keckeisen ↩ ↩²

13. Hoffenberg Death, AP News ↩

14. Epstein Ponzi Firm, CBS News ↩