Short Answer
Epstein obtained significant tax benefits through the US Virgin Islands Economic Development Commission (EDC) program, which grants up to 90% reductions in federal and local taxes to qualifying businesses. The USVI government lawsuit alleges he fraudulently claimed these benefits while failing to actually create the local jobs and genuine economic activity the program requires.
In Detail
What the EDC Program Does
The USVI EDC program was designed to attract genuine business investment to the islands by offering substantial tax incentives — including reductions of up to 90% on income taxes, excise taxes, and gross receipts taxes. Qualifying businesses must demonstrate they are creating local employment and economic development.
Epstein’s Claims
Epstein’s entity Southern Trust Company claimed EDC benefits through his USVI operations for years. Southern Trust was nominally described as a financial management and data-mining company. Epstein claimed hundreds of millions of dollars in income was connected to USVI-based activities, sheltering enormous sums from standard federal taxation.
The Alleged Fraud
The USVI attorney general’s lawsuit, filed in 2020, alleged that Southern Trust did not actually conduct the legitimate business operations it claimed, that the local employment requirements were not genuinely met, and that Epstein used the EDC status as a cover for illegally shielding income from taxation while maintaining his primary operations in New York and elsewhere.
The Settlement
Following Epstein’s death, his estate negotiated a settlement with the USVI government. In 2022, the estate agreed to pay $105 million to the US Virgin Islands to resolve the claims, which had also implicated JPMorgan and Deutsche Bank through their management of accounts that facilitated the tax strategy.