Loved the movie but never understood how he was “scamming people”
Wasn’t he just selling stocks?
In: 122
So the first part wasn’t technically illegal.
He started by selling stocks as a stock broker. But he charged a 50% commission. So if a customer wanted to buy $5k worth of stock, they’d actually get $2.5k worth of stock and Jordan and company would pocket $2.5k. I believe that’s illegal now (well, regulated by the SEC), but it wasn’t at the time. People just didn’t read the fine print.
Then he started doing illegal stuff.
He would buy stocks pre-ipo, and then his company would be the ones to take those companies public. There’s some conflict of interest there for sure, but the legality of that was a little gray. It wasn’t blatantly illegal yet.
He would then instruct his brokers to sell the hell out of that stock. Which would in turn drive the price up higher than it had any business going. Then he would sell his shares. This is called a pump and dump. Where he bought the shares cheap, caused the price to artificially increase very quickly, then dump all the shares he held.
Now that is very blatantly insider trading. And illegal. So how he covered his tracks was through “ratholes” where he would pay people who were not in the finance world to make these transactions for him. In the movie he used his aunt in law and his friend from highschool. But in real life he needed quite a few to make it happen. Anyway this got him around the insider trading, as technically on paper, HE didn’t invest in these companies that he was pumping. He was still pumping but on paper he wasn’t dumping. Which is how he avoided suspicion.
Anyway, he couldn’t exactly take the payouts from these rathole pump and dumps to the bank. So he used a swiss bank to avoid getting caught, of course, this also means he was committing tax fraud. As he didn’t “recognize” his earnings.
The Swiss famously don’t give a shit about other countries law enforcement. So they were happy to take his money and not cooperate with the FBI. Which is why it’s still unknown *exactly* how much he made. Jordan has kind of hinted he made more than the $200 million they caught him on.
Anyway. That’s pretty much the jist of it. He used random people to buy stocks cheap, he used his position as the head of a brokerage firm to pump up the value of those stocks, then he sold them. That’s insider trading, and to cover his insider trading he also had to commit tax fraud.
Obviously there was other stuff like drugs and prostitution and destruction of property that also happened. But I assume you’re only asking about the financial crimes.
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