After watching The Wolf Of Wall Street I have to ask, what did Jordan Belfort do criminally wrong exactly?

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After watching The Wolf Of Wall Street I have to ask, what did Jordan Belfort do criminally wrong exactly?

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Anonymous 0 Comments

Answer: His company had brokers who would “encourage” customers to purchase shares of companies that Belfort had a personal stake in. This inflated the price of the stock, allowing Belfort to make a profit.

He also committed a series of other crimes (money laundering, drug offenses, etc) but the Pump-and-dump was his signature crime.

Anonymous 0 Comments

Belfort did two major types of “white collar” crimes as the owner of his stock brokerage: securities fraud and money laundering.

I won’t explain the laundering as it’s a whole different beast and it’s also very clear in the movie how and why it’s done.

For securities fraud, he used high-pressure sales tactics to mislead average people into buying junk securities and collecting commission or pushing people to buy junk securities which were used in another type of securities fraud scheme: *the pump-and-dump.*

Essentially, Belfort and his *outdoor* friends bought dirt cheap junk stocks for pennies per share in total secrecy. Then Belfort told his *indoor* friends to call victims and have them buy into “an amazing stock opportunity” which were the additional junk stocks.

The more victims they brought into the scheme, the more valuable the junk stock became. **This is the pump.**

However, before the internet, the victims had no idea what the stock was worth in real time. They just knew the stock was rising through delayed tickers or in the papers.

Additionally, the victims could not sell the junk stocks and cash out. Belfort used high pressure sales to keep them in the game. After all, the only way to sell your stock was to go through the same charismatic guy who sold it to you in the first place. Of course he’s going to butter you up and get you thinking about all the money you will make.

Now, once the junk stock rose high enough, Belfort would tell his outside friends to dump everything and cash out. **This is the dump.**

The victims would be stuck with a worthless stock because they couldn’t sell fast enough. They were left in the dust.

Using random numbers, Belfort would get 1M shares for $10k investment, pump the shares up to $3 per share, and then dump them for a profit.

This is fraud.

Belfort was not the first or the last to run the pump-and-dump scheme. Nor did the internet fix it. In fact, pump-and-dump schemes are more prolific than ever in the crypto world.

Edit: a few comments have brought up GME which was not a classic pump. GME was a gamma squeeze and was designed to hurt the firms betting against it.

Anonymous 0 Comments

This is where reading the book is worthwhile. It’s an interesting read and not super super technical but does go a little further into the scheme.

Anonymous 0 Comments

It’s basically insider trading, but on the other end. Instead of knowing a stock will go up and telling your friends to invest, you know the stock is worthless and tell people to invest so you can pump up the demand (and therefore the price) then you dump it to the late stage investors jumping in the bandwagon and it collapses. That’s the dump part

Anonymous 0 Comments

He scammed people into inflating the price of stock that was worthless. Or, worth much less than his company misled people into buying.

Belfort would buy cheap stock at a low price. Then hype up the stock by spreading rumors, misinformation, fake news, “hype”, and generally misleading people the stock was going to be worth a lot more than its current $0.01 price a share.

So these “financial advisors” would hype up a stock Belfort (& his goons) knew was trash saying it was the next big thing. Little guy/average Joe trust their *financial advisor* and pours money into this bad stock.

Belfort (& his goons) sell the stock they owned at an inflated price. The company or stock is not worth nearly as much because it was a pump & dump. Pump up the price and dump the stock when it gets inflated.

These guys were supposed to be looking out for their clients as advisors. And knowingly mislead clients into bad investments so they could dump the shares in the company they knew was junk.

Plus, Belfrot did a lot of random crimes like money laundering, drug related crimes, and so on.

Anonymous 0 Comments

The stock market is a heavily regulated price. It sets what you can charge for commission and sets caps on how much a stock can go up or down in a day. Jordan Belfort discovered that penny stocks were basically unregulated and no one was watching them. The average penny stock buyer was some poor shmuck who wanted to gamble and perhaps make $20 on them.

Jordan Belfort began upping the clientel on these things, attracting high grade buyers who would normally be interested in the S&P 500 or the Nasdaq stocks. He would sell them on your regular stocks and then introduce them to “entry level” positions on penny stocks. The commissions on these penny stocks were actually much better per dollar invested than regular stocks. Because of this a good broker could become very rich by selling a lot of them.

Belfort got greedy though. Belfort bought the penny stocks before directing his clients to buy them. When his clients showed up in waves to buy them Belfort would sell his shares while telling his clients to continue buying. It was like getting a double commission…. and was also stock manipulation.

Anonymous 0 Comments

People are explaining pump-and-dump. There was also the “women’s shoes” / Madden thread in the movie, [somewhat explained here](https://www.dailymail.co.uk/news/article-8799351/How-shoe-designer-Steve-Madden-created-shoe-empire-strung-junkie.html). When a company joins the stock market, there’s an Initial Public Offering (IPO) where the banks and investors choose an initial price and number of available shares. This is still fairly sketchy about who gets the first buys, whether the price starts too high or low, how it performs on the first day, etc.

In this case, Belfort was running the IPO, and was not supposed to get a head start with a too-influential too-large number of shares, so he made an agreement with Steve Madden to hide his investment in the company.

Anonymous 0 Comments

I just want to remind everyone that Wolf of Wallstreet is not a documentary or an outsiders tale, it is based off a book that scumbag Jordan Belfort wrote. So you are watching what he wants you to think that he did and Jordan is a known liar and fraudster. Scorsese does show some of that, like in the drunk driving recollection, but I think the audience should be very aware that the narrator in this story absolutely should not be trusted. This is the “story” of a convicted criminal, trying to look innocent and convince everyone how rich and powerful he was.

Anonymous 0 Comments

Imagine I walk around picking up pieces of flint (Junk Stock), polish them up and sell them to people who don’t know any better, telling them that they are diamonds (Blue chip stock). I’m not selling them for diamond prices, the people I’m talking to can’t afford that, but I am selling them what they think are diamonds for a price they can afford and a price that would be stupid for them to ignore.

So you have people with little, spending everything they have, to invest in what they think are diamonds only to find out later they are nothing but pieces of worthless polished flint. Belfort walks away with their life savings, they get left holding a bag of useless rocks.

Anonymous 0 Comments

Pump and dump, aka market manipulation.

NFTs are a great example: Basically worthless in one moment, then suddenly propped up by a few people spending hundreds of thousands and even millions of dollars on them. So the prices skyrocket and other people buy lots of them and the price further goes up. The initial investors then start selling theirs for a profit and soon after the value plummets as people realize it was not worth that much.

He did that with stocks.