THE CON: It was a classic pump-and-dump operation: manipulate the price of stocks you secretly own, sell them for a big profit and leave your investors high and dry.
THE DAMAGE: $200 million
THE OUTCOME: Belfort, who agreed to testify against his associates, served about two years of his four-year sentence and was ordered to pay his victims $110 million in restitution.
The SEC had an eye on penny stock trader Jordan Belfort for years. In 1993, the SEC called Stratton Oakmont a boiler room that manipulated stocks to defraud investors for profit.
But the indictments didn’t come down until five years later, when Jordan Belfort was charged with 27 counts of international securities fraud and money laundering.
Perhaps part of the reason it took time to pin the charges on Belfort and his partners: when the SEC came to check the books, the books were bugged. Aware that regulators were suspicious, he used his mother-in-law to launder money to an account in Switzerland.
Before those charges were pressed, it was a wild ride for Belfort. By the time he was in his mid-20s, he was worth $100 million. The business he was in – selling artificially inflated stocks to small investors – was profitable.
The motto at Stratton Oakmont said it all: “You don’t hang up the phone until the customer buys or dies.” Those customers were buying shares that were grossly inflated and of which Belfort and his partners owned large chunks. By setting up a web of foreign bank accounts and corporations, they were able to secretly buy millions of shares of underpriced stock. Then, they would drive up the price and sell the big chunks they owned. They cashed in and the investors were left with worthless stock and huge losses.
The lifestyle he led was a world away from the one he might have known had he continued on as a meat salesman in Queens. Belfort had a 167-foot yacht, a helicopter and a pack of racecars. He also had, according to his 2007 book, “The Wolf of Wall Street,” a serious drug habit.
In that autobiography, Belfort recounts being so stoned that his double vision caused him to fly his helicopter with just one eye open – and to make an unsteady landing in his own backyard when he couldn’t find the airport. On another occasion while high on Quaaludes, he lost his yacht and helicopter – and escaped with his life – after sailing into the Mediterranean during a gale.
In 1999, Belfort pleaded guilty and turned over evidence against his colleagues in crime. He served 22 months of a four-year sentence and was ordered to pay investors 50% of his gross income until they receive $110 million. Along with “The Wolf of Wall Street,” Belfort wrote another book published in 2009, “Catching the Wolf of Wall Street: More Incredible True Stories of Fortunes, Schemes, Parties and Prison.” A movie about his life starring Leonardo DiCaprio has been in the works for several years.