Who Was the Real “Wolf of Wall Street?”

Jacob Harper |

Wolf on Wall Street

Martin Scorcese's newwerst flick is the financial movie Wolf of Wall Street, starring Leonardo DiCaprio. The movie tells the tale of Wall Street broker/chop-shop runner Jordan Belfort who “made $49 million last year, which really pissed me off, because it was $3 million short of a million a week.” Scorsese based Wolf of Wall Street on a memoir of the same name written by the real-life Jordan Belfort, who also loosely inspired the 2000 film Boiler Room.

So who was Jordan Belfort?

From Queens to the "Chop Shop"

Belfort was born in Queens and as a young investor founded the ethically questionable boiler room sales house Stratton Oakmont. From there Belfort became fabulously wealthy, and tailored for himself a hard-partying lifestyle to match. From a financial standpoint, Belfort will probably be best known as one of the largest practitioners (and reputed inventor) of the classic “pump and dump” scheme, where worthless stocks are aggressively sold in "chop shops" telemarketer-style (in fact, Stratton Oakmont is sometimews credited as being the very first chop-shop.) Once the telemarketer/brokers "pump" the stock to its maximum artificial value, they then "dump" their shares, leaving the investors on the other end with eventually worthless invetsments.

Belfort’s firms were well known to tout highly questionable penny stocks, and use every method available to them – cold calls, referral lists, email spam – to sell the stocks at an inflated price to investors on the promise of impending good news for the companies. Once the stocks would bubble, Belfort would dump them, leaving the investors holding onto the now worthless stocks. On an interesting side note, besides shilling highly questionable stocks built up on falsified research, Belfort did occasionally dabble in legitimate finance. He was instrumental in funding shoe retailer Steve Madden ($SHOO) and was at one point their COO.

Belfort Helped Usher in a New Era of Regulation

The SEC had long suspected Belfort of criminal activity, but was unable to pin anything on him because of his penchant for laundering money through Switzerland. But in 1999, after years of investigation (and Belfort’s growing, dangerous ties to the mafia) Belfort turned state’s witness, and did 22 months in a federal lockup. In addition to his sentence he was forced to pay back over $110 million he bilked out of investors.

On a historical note, Belfort’s activities got the SEC to pay closer attention to international financial loopholes. The fabled "Swiss Bank Accounts" and "offshore Cayman Islands banks," of yore became much, much less reliable avaenues for hiding money.

The Wolf of Wall Street begins airing nationwide on Christmas Day.

 

[Image via screengrab]

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Companies

Symbol Name Price Change % Volume
ETRM EnteroMedics Inc. 0.13 -0.00 -2.25 4,116,604
SHOO Steven Madden Ltd. 35.06 0.24 0.69 382,056

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