Frankel was born in Toledo, Ohio into a family of Jewish heritage. He is the second child of county judge Leon Frankel. He studied at the University of Toledo, but dropped out after two years. Instead he developed an interest in finance and the securities market.
In the mid-1980s he befriended John Schulte, the owner of the small brokerage firm of John F. Schulte, Inc, which was affiliated with Dominick & Dominick of New York City. He convinced Schulte's wife Sonia that he was a "Jewish genius" and had a surefire method to pick good stocks. In January 1986, Sonia convinced her husband to hire Frankel as a consultant. Schulte soon grew tired of Frankel's lack of success and the fact that he did not follow the company dress code. When Frankel misrepresented himself as a Dominick & Dominick trader in electronic market terminals, Schulte fired him. At that point, Sonia had become Frankel's mistress.
However, the Schultes' friend Ted Bitter had been convinced and gave Frankel his savings. Frankel convinced LaSalle Street Securities to make him their Toledo representative and formed Winthrop Capital - in his parent's home and using the social security number of a friend who he signed to be Winthrop's president. He put an ad in the Yellow Pages claiming that he was the only brokerage company with insured accounts.
In 1986 Frankel used his fanciful tales to convince businessman Douglas Maxwell to join him in the Frankel Fund. Maxwell would bring a number of business contacts with him. He also made most of the trades, since Frankel would not do it himself for fear of failure.
Frankel moved to Palm Beach, Florida to be closer to his investors and there concocted more fanciful tales about his supposed prowess as a money manager. Thus he attracted millions of dollars of would-be-investors' money. Most of it was lost in Maxwell's bad investments. Ted Bitter and another client, John Herlihy, complained. In turn, Frankel repaid one of the Maxwell's investors from their accounts.
In 1991, based on the Frankel Fund failures, the U.S. Securities and Exchange Commission banned Frankel from the securities business for life. However, by that time Frankel was already busy with his next venture, Creative Partners Fund LP, by which he tried to attract a wider base of clientele.
Sonia, who had left John Schulte and gained the custody of their children, joined Frankel in his new business. They formed the Thunor Trust using signatures of Sonia, a relative of a Creative Partners Fund investor and a name of a complete stranger, without his permission. Frankel created it to acquire insurance companies that were in financial trouble and therefore cheap to acquire. He intended to use their mandatory money reserves for his own purposes and use them to acquire even more insurance companies in a modified Ponzi Scheme. In addition, he used them to fund his own lavish lifestyle.
The first insurance company he bought was Franklin American Life insurance Co in October 1991. Frankel used its reserves to pay off Creative Partners Fund investors. Through the trade Frankel also met Tennessee businessman John Hackney.
Over the following years, Frankel bought additional insurance companies in the Southern United States. In 1998 he bought the first company that was not in financial ruin, First National Life Insurance Company of America. By that time, the claimed assets of Thunor Trust totalled $434 million. Frankel, Sonia and the kids moved to Greenwich, Connecticut.
Next Frankel planned to set up a fraudulent charity scheme with links to the Vatican. He researched the life of St. Francis of Assisi to show a proper front. Using the name of his friend and bodyguard David Rosse he contacted lawyer Thomas Bolan, a co-founder of the Conservative Party of New York; New York priest Peter Jacobs and Monsignor Emilio Colagiovanni, emeritus of Roman Rota.
He claimed that he was a wealthy Jew who wanted to give more than $50 million to Catholic charities and wanted to found a St. Francis of Assisi Foundation, headquartered in Liechtenstein. In effect, he tried to ally with the Vatican in his continuing campaign to acquire insurance companies. However, Frankel failed in his attempt to link the fund exclusively to the Vatican - instead it was linked to Colagiovanni's Monitor Ecclesiasticus.
In May 1999, Mississippi Insurance Commissioner George Dale looked into Frankel's insurance companies and put the three Clinton, Mississippi-based companies under state supervision. Frankel acquired false identities and bought millions of dollars worth of diamonds and a private jet. Two days later he flew to Europe with two of his mistresses in tow and ended up in Germany. He left behind burning papers and astrological charts in his Greenwich, Connecticut mansion, which was seized by the Connecticut U.S. Attorney's office. He and his employee-cum-mistress Cindy Allison were later arrested in the Hotel Prem in Hamburg, Germany.
At October 1999, the US federal government indicted Frankel for fraud worth $208 million. German police accused him of smuggling in diamonds and using a fraudulent passport. Frankel pleaded guilty, hoping for a delay in extradition. In a June 2000 interview, he insisted that his financial dealings were an effort to feed the world's hungry. In June 2000, a German court sentenced him to three years in prison. In March 2001, Frankel unsuccessfully tried to escape the jail.
At the same time, federal authorities in the US blamed the state regulators for letting Frankel accrue so much influence in his insurance companies. Many of his accomplices, including Monsignor Colagiovanni, were indicted, charged or arrested. Eventually Frankel was extradited to USA.
Colagiovanni was charged with money laundering and in September 2002 pleaded guilty to participating in the insurance scam. In October 2002, Sonia Howe (previous Sonia Schulte) pleaded guilty to two felony charges, racketeering and money laundering.