Stratton Oakmont

Stratton Oakmont, Inc. was a Long Island, New York, "over-the-counter" brokerage house founded in 1989 by Jordan Belfort and Danny Porush. It defrauded many shareholders leading to the arrest and incarceration of several executives, and the closing of the firm in 1996.

Stratton Oakmont Inc
TypeBrokerage House
Industrystock exchange
Founded1989
FounderJordan Belfort
DefunctDecember 1996
Headquarters1979 Marcus Avenue, Lake Success, New York, US
Area served
United States
Key people
Revenue$3 billion (1996)
Number of employees
1,378

Section 230 of the Communications Decency Act was created in response to Stratton Oakmont, Inc. v. Prodigy Services Co..

History

Jordan Belfort founded Stratton Oakmont in 1989 with Danny Porush and Brian Blake.[1] Earlier, Belfort opened a franchise of Stratton Securities, a minor league broker-dealer, and then bought out the entire firm.[2] Stratton Oakmont became the largest OTC firm in the United States during the late 1980s and 1990s,[3] responsible for the initial public offering of 35 companies, including Steve Madden Ltd.[4] The firm did not have a product control function to verify prices of its positions and monitor trading activity.[5]

Stratton Oakmont 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 in order 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 would also try to maintain the price of a stock by refusing to accept or process orders to sell the stock.[6] In 1995, the firm sued Prodigy Services Co. for libel in a New York court, in a case that had wide legal implications.[7]

The firm was under near-constant scrutiny from the NASD from 1989 onward. Finally, in April 1996, the New York District Business Conduct Committee barred Stratton Oakmont from conducting principal retail transactions for a year. Stratton Oakmont appealed to the NASD National Business Conduct Committee. In December, the NBCC expelled Stratton Oakmont from the NASD, putting the firm out of business. Officials described Stratton Oakmont as "one of the worst actors" in the securities industry, with a history of "obvious disregard for all rules of fair practice."[8]

In 1999, Belfort and Porush were indicted for securities fraud and money laundering.[9] They pleaded guilty and admitted that for seven years they operated a scheme in which they manipulated the stock of at least 34 companies.[10] As part of their plea deal, they received less prison time, and cooperated with prosecutors in their investigations of other brokerage houses.[10]

The 2013 film The Wolf of Wall Street is a drama based on the memoirs of Jordan Belfort, directed by Martin Scorsese. Leonardo DiCaprio stars as Belfort[11] and Jonah Hill plays fictional character Donnie Azoff,[12] who is loosely based on Porush.

See also

References
  1. "The Wolf of Wall Street (2013)". History vs. Hollywood. Retrieved August 5, 2015.
  2. Haglund, David (December 31, 2013). "How Accurate Is The Wolf of Wall Street?". Slate. Retrieved January 11, 2015.
  3. Park, Sang (February 6, 2014). "Cinema Weekly: The Wolf of Wall Street". The Exonian. Retrieved August 5, 2015.
  4. "Meet Jordan Belfort the real Wolf of Wall Street". Interview & Review. May 14, 2014. Archived from the original on July 8, 2014. Retrieved August 5, 2015.
  5. Schwartz, Bob (June 11, 1991). "Trade Group Probing Stock Sales of 3 Firms : Inquiry: Offerings of International Physical Systems, Ropak Laboratories and DVI Financial were underwritten by a brokerage being investigated". Los Angeles Times. Retrieved August 5, 2015.
  6. Mulligan, Thomas S. (April 17, 1997). "Investor Wins $10 Million in Penny-Stock Broker Case". Los Angeles Times. Retrieved January 11, 2015.
  7. Stratton Oakmont, Inc. v. Prodigy Services Co., No. 31063/94, 1995 WL 323710, 1995 N.Y. Misc. LEXIS 229 Archived April 17, 2009, at the Wayback Machine (N.Y. Sup. Ct. 1995).
  8. "NASD Regulation Expels Stratton Oakmont; Principals Also Barred". FINRA. December 5, 1996. Retrieved January 11, 2015.
  9. Stefania Bianchi; Mahmoud Habboush (May 19, 2014). "Wolf of Wall Street Belfort Is Aiming for $100 Million Pay". Bloomberg. Retrieved May 21, 2014.
  10. Wyatt, Edward (September 24, 1999). "Stratton Oakmont Executives Admit Stock Manipulation". New York Times. Retrieved August 5, 2015.
  11. Nashawaty, Chris (February 17, 2011). "Leonardo DiCaprio and Martin Scorsese teaming up again for 'The Wolf of Wall Street. '". Entertainment Weekly. Retrieved January 17, 2011.
  12. Sacks, Ethan (June 17, 2013). "'The Wolf of Wall Street' Trailer Released Shows Leonardo DiCaprio at Debaucherous Best". NYDailyNews.com. Daily News, LP. Retrieved June 19, 2013.
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