Stratton Oakmont: Victims And Vanishers

Stratton Oakmont was a Long Island, New York, over-the-counter brokerage house founded in 1989 by Jordan Belfort and Danny Porush. The firm employed high-pressure sales techniques to sell shares in dubious companies to investors, luring them in by allowing them to make a profit on their initial trade. Stratton Oakmont defrauded many shareholders, leading to the arrest and incarceration of several executives and the closing of the firm in 1996. Belfort and Porush were indicted for securities fraud and money laundering in 1999, pleading guilty to manipulating the stock of at least 34 companies. Belfort was ordered to pay a total of $110 million in restitution, but the 1,513 people who were defrauded have only received a fraction of the money they lost.

Some investors lost everything, while others profited

Jordan Belfort's firm Stratton Oakmont was a Long Island, New York, over-the-counter brokerage house founded in 1989. It became the largest over-the-counter firm in the United States during the late 1980s and 1990s, employing 1,000 people and selling $1 billion worth of shares. Stratton Oakmont followed the traditional "boiler room" model of using high-pressure sales techniques to sell shares in dubious companies to investors.

The firm participated in pump-and-dump schemes, a form of microcap stock fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements to sell the cheaply purchased stock at a higher price. Once the operators of the scheme "dump" their overvalued shares, the price falls and investors lose their money. Stratton Oakmont also tried to maintain stock prices by refusing to accept or process orders to sell stock.

In 1996, Stratton Oakmont was shut down after it was discovered that they had defrauded shareholders. Belfort and co-founder Danny Porush were indicted for securities fraud and money laundering. They pleaded guilty and admitted that for seven years they had manipulated the stock of at least 34 companies. Despite admitting to these crimes, Belfort escaped with only a two-year jail sentence thanks to his decision to cooperate with the authorities. Porush was sentenced to four years in prison.

While some investors lost everything, others profited. One person on Reddit recalled their experience as a customer of Stratton Oakmont, stating that they "got out with all the money [they] invested plus some profit." They also mentioned that the firm tried to push a huge loss on an unauthorized trade into their account, which would have resulted in a loss of $100,000 or more. However, they threatened to report the firm to the SEC, and the trade was reversed. Another individual, Josh Shapiro, worked at Stratton Oakmont and made tens of thousands of dollars a month. He eventually became disillusioned and left the company, but he still made a significant profit during his time there.

Stratton Oakmont was fined, shut down, and its founders jailed

The decision to shut down Stratton Oakmont was made in December 1996, and it was enforced by the NASD, which sought to put an end to the firm's fraudulent activities. Stratton Oakmont had been under scrutiny by the NASD since its founding in 1989. The firm was accused of bilking investors out of millions of dollars through stock price manipulation and other illegal practices. Stratton Oakmont was found to have violated NASD rules and federal laws by excessively marking up the stock of Master Glazier Karate, resulting in overcharging customers by approximately $425,000.

The NASD's decision was appealed by Stratton Oakmont's lawyers to the Securities and Exchange Commission (SEC), but it was upheld. The SEC subsequently denied a request to stay the sanction pending appeal. Stratton Oakmont's president, Daniel Porush, was barred from the securities industry, and its head trader, Steven Sanders, was suspended for one year. The firm was sanctioned with a one-year prohibition against effecting any principal retail transactions.

The founders of Stratton Oakmont, Jordan Belfort and Danny Porush, were indicted in 1999 for securities fraud and money laundering. They pleaded guilty and admitted to manipulating the stock of at least 34 companies over seven years. As part of their plea deal, they received reduced prison sentences and cooperated with prosecutors in investigating other brokerage houses.

The story of Stratton Oakmont and its founders is depicted in the film "The Wolf of Wall Street," based on Jordan Belfort's memoirs. The film portrays the fraudulent activities of the firm and the high-pressure sales tactics employed by its brokers. It also showcases the lavish lifestyle led by Belfort and his associates, fueled by the illegal gains from their schemes.

Jordan Belfort received a shorter sentence for cooperating with authorities

Jordan Belfort, the founder of Stratton Oakmont, was sentenced to four years in prison in 2003. However, he only served 22 months at the Taft Correctional Institution in California. Belfort's reduced sentence was the result of a plea deal he made with the Federal Bureau of Investigation. As part of this agreement, he wore a wire and provided testimony against numerous partners and subordinates involved in his fraud scheme. Belfort's cooperation with authorities allowed him to receive a shorter prison sentence.

Belfort founded Stratton Oakmont in 1989 as a franchise of Stratton Securities. The firm quickly gained notoriety for its involvement in pump-and-dump schemes, a form of stock fraud that involves artificially inflating the price of stock through false statements before selling it at a higher price. Stratton Oakmont defrauded many shareholders, leading to the arrest and incarceration of several executives and the firm's closure in 1996.

In 1999, Belfort pleaded guilty to securities fraud and money laundering. He admitted to manipulating the stock of at least 34 companies over a period of seven years. As a result of his plea deal and cooperation with prosecutors, Belfort received a reduced sentence.

Belfort's time at Stratton Oakmont was marked by lavish parties and recreational drug use. The firm employed over 1,000 stockbrokers and was involved in stock issues totaling more than $1 billion. Despite its success, Stratton Oakmont was under constant scrutiny from regulatory bodies, particularly the National Association of Securities Dealers (NASD). In 1996, the NASD expelled Stratton Oakmont, putting an end to its operations.

Belfort's story inspired the 2013 film "The Wolf of Wall Street," directed by Martin Scorsese. The film, starring Leonardo DiCaprio as Belfort, depicts the fraudulent activities and excessive lifestyle of Belfort and his associates. Belfort has since become a motivational speaker and writer, sharing his story and the lessons he learned from his time at Stratton Oakmont.

Employees were pressured to spend their earnings quickly

Stratton Oakmont, Inc. was a Long Island, New York, over-the-counter brokerage house founded in 1989 by Jordan Belfort and Danny Porush. The firm became the largest of its kind in the United States during the late 1980s and 1990s. It was shut down in 1996 due to its involvement in fraudulent activities, including pump-and-dump schemes that defrauded many shareholders.

Former employee Dwayne Jackson revealed that he earned nearly $30,000 in one month while working at Stratton Oakmont. He described the toxic culture that encouraged employees to spend their money quickly:

> "They weren't teaching us how to be money managers or how to get rich, they just taught us how to sell stock over the phone. And in order to keep that machine going, we had to be broke and create bills."

Jackson recalled the pressure to keep up with the lavish lifestyles of his colleagues, even if it meant living beyond their means. He mentioned a colleague who drove a Ferrari but slept on his mother's couch, illustrating the disconnect between their earnings and their extravagant spending.

The pressure to spend lavishly took a toll on employees' mental well-being. Jackson shared his own experience of feeling increasingly miserable despite his financial success. He also witnessed the negative impact of this pressure on his colleagues, who turned to drugs, prostitutes, and other destructive behaviours to cope.

The culture at Stratton Oakmont prioritised short-term gratification over financial stability and often led to impulsive spending decisions. This pressure to spend earnings quickly contributed to the toxic environment that ultimately took a toll on the employees' well-being and sense of security.

The company used aggressive and deceptive sales tactics

Stratton Oakmont's aggressive and deceptive sales tactics were central to the company's operations and were instrumental in defrauding its investors. The company employed a "pump and dump" scheme, where they would artificially inflate the value of a particular company's stock and then use high-pressure sales tactics to sell it to unsuspecting investors. This caused the stock price to rise, guaranteeing substantial profits for Stratton Oakmont and its associates.

Jordan Belfort, the founder of Stratton Oakmont, played a central role in these deceptive practices. Belfort wrote a sales script that brokers were instructed to follow, using manipulative tactics to gain clients' trust. They would first approach clients with a well-known stock to gain their confidence and then sell them the inflated stock once they had opened an account with Stratton Oakmont. The brokers were urged to be relentless in their sales approach, living by the motto, "Don't hang up until the customer buys or dies."

The company's aggressive tactics included cold-calling, high-pressure sales techniques, and unauthorised trades. They also employed deceptive marketing strategies, such as creating a false sense of urgency and using misleading positive statements to promote the stocks they were trying to sell. Stratton Oakmont also tried to maintain stock prices by refusing to accept or process orders to sell stock.

The firm's employees were incentivised by a lucrative commission structure, with brokers earning huge commissions regardless of the success of the companies they were selling. The company's culture was also a key factor in encouraging unethical behaviour, with Belfort wanting money to be constantly on the minds of his employees. Stratton Oakmont was known for its extravagant office parties and corporate retreats, further fostering an environment that prioritised short-term profits over long-term sustainability and ethical boundaries.

The consequences of Stratton Oakmont's aggressive and deceptive sales tactics were severe. Many investors lost significant amounts of money, with some reporting losses of hundreds of thousands of dollars. The company's illegal activities eventually led to its closure in 1996, with several executives, including Belfort and Porush, being arrested and incarcerated for securities fraud and money laundering.

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