The Wolf Of Wall Street by Jordan BelfortI have recently read ‘The Wolf Of Wall Street’ by Jordan Belfort. The book relates his exploits as the one-time leader of a stock broking firm in America. Quite how to take the book is up to the individual. It is in part a tale of greed, market manipulation, wild excess and heavy-handed sales tactics. It is also a tale of the influence of drugs on a life and a family, followed by details of just what it takes to ‘get sober’. However, the elements of the book that readers of this site might find of most interest relate to the wild and uncompromising tactics of his firm and staff. Without a doubt, they took the idea of aggressive sales to a whole new level. The broad outline of their activities are portrayed in the movie Boiler Room , which with hindsight, may have been based around the activities of this company. Essentially, the firm was involved in the launching (IPO) of small firms to the NASDAQ . At this point, they would make under the table deals with management for options and stock and then have the shares of the firm sold in great numbers by the team of sales staff. This selling would guarantee a great first day, week and month of trading for the new company. Prices would rise enabling the management - including Belfort - to sell their stock at an almost immediate profit. This profit was better than risk-free because invariably, they had not actually spent any money themselves to acquire their holding. Needless to say, this made it hard for the early investor that was not privy to such assistance to make a profit. In fact, the vast majority of their ’customers’ would only ever lose money. Only the speed of the loss would vary. The book, it has to be said, does not dwell on this issue… This is actually a hard crime to describe adequately - it must be since the FBI and SEC found it very difficult to prosecute! Ultimately, Jordan Belfort was prosecuted for crimes including money laundering, fraud and insider trading, though it took years for this to happen. They were not technically in breach of many laws, though they clearly were not complying with the ‘spirit’ of the law. They were not ' churning ’ clients by overtrading their accounts, which is what is usually thought of as the typical stockbroker offence. They were also not using the Mafia style con of selling shares in companies which barely existed. This is a more blunt form of stockbroker fraud . Instead, they were dealing in real firms, with real clients and income and expenses. Their clients found themselves owning stock in ongoing businesses. However, without the hard-sell tactics of the brokerage, the prices paid by the public were usually unsustainable. Of course, they were also dealing from the inside to give themselves a personal edge and handsome profit. I can recommend The Wolf Of Wall Street by Jordan Belfort as an entertaining read in places. The financial insight is quite frightening! However, the descriptions of his personal life and use of profanity may cross ethical lines for some readers. To read more about financial crime and how to protect yourself, please also read:
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