The ultimate sophisticated investor and fake family offices

More details are emerging from Jeffery Epstein’s relationship with Leon Black and his family office. They confirm how even one of the world’s most knowledgable and sophisticated investors can get caught up with the wrong company and have their reputation scrutinized. It’s a cautionary tale for all family offices and their principals.

That’s because the family office sector attracts many fraudulent individuals and groups who purport to be trustworthy and competent. Don’t just think that you can’t fall victim to an unsettling and potentially reputationally damaging episode as the Leon Black/Jeffery Epstein case illustrates because of your knowledge, contacts, and expertise. 

It was generally agreed that Epstein was an active participant who provided unique solutions to several issues raised in the family office…

Few individuals are more sophisticated and savvy in the investment world than Leon Black. The co-founder of one of the world’s most successful private equity groups Apollo Global Management and former right-hand man to the junk bond king Michael Milken few know Wall Street’s working and high finance as Black does. 

But Black and his family office got caught up with Jeffery Epstein, the notorious financier and sex offender who died in prison in 2019. Of course, that’s been known for some time. Last week, however,  law firm Dechert revealed more about that relationship in an investigation – and it mentioned Black’s family office. 

The law firm said: “(that many of the witnesses the firm questioned) believed Epstein provided significant value to Black and the Family Office in the areas of estate and tax planning.” Black’s family office is New York City-based Elysium Management, which employs at least 20 individuals. 

The law firm added: “It was generally agreed that Epstein was an active participant who provided unique solutions to several issues raised in the family office.”

Epstein’s tentacles didn’t just reach out to Black, but as the Dechert’s investigation says, the multi-billionaire’s family office as well. 

It’s important to point out that Dechert’s investigation found no wrongdoing by Black or his family office. Black’s private equity group, Apollo, released a statement soon after the Dechert report was made public. It said: “Epstein’s advice was vetted by respected professional advisors; and Dechert found no evidence that Mr. Black was involved in any way with Mr. Epstein’s criminal activities at any time.”

Black may at least partially, if not in full, be exonerated by the Dechert investigation, but today he might have some regrets with forming any business relationship with Epstein, given the toxicity associated with the deceased financier. 

But these types of relationships, where a principal and their family office get tied up with the wrong kind of company, are more prevalent than many in the sector would care to admit. Family Capital ran a story shortly after launching in 2016 called: “Beware of the Fake Family Office”. It remains popular today – type in fake family office into Google – and as pertinent as ever.  

Yes, cybersecurity is one of the biggest security issues today faced by family offices. But no amount of cybersecurity efforts can stop falling for the wrong advisor who can come back and sting you in the tail years later as Black found.