What a “rathole” is in the example of “The Wolf of Wall Street”
In: Economics
The rathole was part of a pump and dump stock scheme.
In its most basic form. A disreputable stock broker gets a coconspirator, the rathole, to buy a bunch of usually very cheap stock. Then the broker turns and pumps up the stock. Shown in the movie by having his traders just lie to investors about the company (they’re about to get a patent, they’re making some new drug, blah blah I have inside information about company x so buy their stock). As more and more sucker investors buy the stock based on bogus info, the price of the stock rises.
Then when the stock is selling at a frenzy, the broker tells the rathole to sell. This is the dump. Basically they rigged the stock market to guarantee buying at low and selling at an artificially (and illegally) inflated high price.
One reason Belfort got away with his scams so long is that he was dealing in insider information. Made up insider information often, but still illegal. So his victims didn’t rush to the fbi or sec to rat themselves out as stock cheaters either. Belfort did scam non-cheaters too. He’s not a good guy. But a lot of his pump and dump scam went after those inclined to break stock trading rules to get rich quick.
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