Leah Sugai
Dan Deines
Financial Reporting- ACCTG 433
8 April 2014
Playin’ the Penny Stocks
“The Wolf of Wall Street,” recently has become a popular discussion topic since the film debuted in December of 2013. Jordan Ross Belfort, “the wolf,” was born in 1962 to a couple of accountants living in New York. (Smith 56). At an early age, it was evident that Belfort possessed the skills of a natural born salesman. He started utilizing these skills when he decided to channel his focus toward becoming a stockbroker. After working for a brokerage firm for a couple years, Belfort founded his own brokerage firm in 1990, which he named, “Stratton Oakmont.” It was an “over-the-counter” brokerage firm and quickly became the largest and most influential OTC brokerage firm of the late 1980s and 1990s. Jordan Belfort was engaged in a variety of fraudulent activities. Belfort’s heavy involvement in these activities led to a very time consuming investigation and eventually, a conviction. There were many devastating losses to investors from the white-collar crimes that Belfort participated in and promoted daily. Stratton Oakmont was the arena where Jordan Belfort, and his loyal band of trusted employees, came to battle everyday by pushing stock sales onto unsure investors. Belfort’s firm specialized in selling mid-range priced stocks to wealthy businessmen. The main operation behind the fraudulent activities at Stratton Oakmont was an illegal trading system known as the “pump and dump.” This is a type of Microcap stock fraud. Microcap companies are smaller than regular public companies, with securities trading at less than five dollars per share. They are not listed on a national exchange and are referred to as “penny stocks” (Wiley 160). “Pump and dump,” relies on positive information given by the brokers to the potential investors. This information is usually misleading or