Towers Financial Corporation was a debt collection and health-care financing company founded by Steven Hoffenberg in the 1970s. Hoffenberg served as its CEO, president, and chairman.
By the late 1980s and early 1990s, the company appeared to be prosperous. However, it was operating as a large Ponzi scheme, reporting inflated revenues and fictitious profits to attract new investors whose funds were used to pay returns to earlier ones. Meanwhile, Hoffenberg was diverting money for his personal use, including a brief ownership of The New York Post in 1993.
At that time, Hoffenberg was an associate of the infamous sex offender Jeffrey Epstein and was reportedly paying Epstein about US$25,000 a month as a consultant.
In March 1993, Towers Financial filed for bankruptcy protection under Chapter 11, marking its collapse. The scheme had sold over US$450 million in fraudulent notes and bonds to roughly 200,000 investors, with Hoffenberg and his associates misrepresenting the company’s financial health through falsified statements. Losses for investors exceeded US$400 million.
The bankruptcy triggered investigations by the Securities and Exchange Commission (SEC) and federal authorities, which revealed the extent of the fraud. A trustee was appointed to manage the estate, but asset recovery was complicated by Hoffenberg’s actions, including attempts to hide funds. The trustee reported that there was little left to recover as the money was basically all used to pay interest to early investors and to support Hoffenberg’s extravagant corporate life style.
Hoffenberg was charged in February 1994 with fraudulently selling US$450 million in securities. He claimed in court and in interviews that Epstein helped to orchestrate the fraud. Epstein apparently denied any involvement, but The New York Times recently stated: “It is hard to believe he was in the dark about what was happening.”
On April 20, 1995, Hoffenberg pleaded guilty to five counts: conspiracy to commit securities fraud; conspiracy to obstruct justice (by instructing employees to lie to the SEC); two counts of mail fraud (related to Towers and a separate scheme defrauding Illinois insurers); and tax evasion. This plea admitted his role in defrauding investors out of approximately US$462–475 million, making it the largest Ponzi fraud in U.S. history until the discovery of Bernie Madoff’s scheme (see Chapter 1 in Famous Frauds & Financial Failures).
In March 1997, Hoffenberg was sentenced to 20 years in prison, fined US$1 million, and ordered to pay US$463 million in restitution by Judge Robert W. Sweet in the Southern District of New York. He also settled civil suits with the SEC in 1994, agreeing to pay US$60 million without admitting guilt. He also agreed to be barred from ever serving as an officer or director of any company with public investors.
Hoffenberg served 18 years and was released in 2013. He died in 2022.
Sources:
Enrich, David, Eder, Steve, Silver-Greenberg, Jessica, & Goldstein, Matthew (2025), “Scams, Schemes, Ruthless Cons: The Untold Story of How Jeffrey Epstein Got Rich,” The New York Times, December 12: https://www.nytimes.com/2025/12/16/magazine/jeffrey-epstein-money-scams…
Henriques, Diana (1994), “Chief of Towers Financial to Settle 2 Fraud Lawsuits,” The New York Times, November 3: https://www.nytimes.com/1994/11/03/business/chief-of-towers-financial-to-settle-2-fraud-lawsuits.html
Henriques, Diana (1995), “Hoffenberg Confesses to Ponzi Scheme,” The New York Times, April 21: https://www.nytimes.com/1995/04/21/business/hoffenberg-confesses-to-ponzi-scheme.html
U.S. District Court for the Southern District of New York (1995), “United States v. Hoffenberg,” December 18: https://law.justia.com/cases/federal/district-courts/FSupp/908/1265/1457501/