In the 2013 film, The Wolf of Wall Street, the audience gets the notion that not everything that Stratton Oakmont is doing is on the up-and-up. Jordan Belfort even breaks the 4th wall several times throughout the course of the movie to explain what some of these measures might be. But then he stops short, each time effectively saying, 'I'm boring you with the minutiae'.

What illegal practice(s) caused the FBI to seek charges?

1 Answer 1


Primarily, securities fraud.

Keeping in mind that the film is based on a true story, with Jordan Belfort being a real person, we can find out what charges sent him to prison.

Wikipedia states that Jordan Belfort was convicted of "Securities fraud, money laundering". And the article on Stratton Oakmont states that "Stratton Oakmont participated in pump-and-dump schemes."

Securities fraud, as defined by Wikipedia, is

Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of securities laws.

There are several forms that these violations take:

  • Pump and dump schemes, involving use of false or misleading statements to hype stocks, which are "dumped" on the public at inflated prices. Such schemes involve telemarketing and Internet fraud.
  • Chop stocks, which are stocks purchased for pennies and sold for dollars, providing both brokers and stock promoters massive profits. Brokers are often paid "under the table" undisclosed payoffs to sell such stocks.
  • Dump and dilute schemes, where companies repeatedly issue shares for no reason other than taking investors' money away. Companies using this kind of scheme tend to periodically reverse-split the stock.
  • Other unscrupulous brokerage practices, including "bait-and-switch", unauthorized trading, and "no net sales" policies in which customers are prohibited or discouraged from selling stocks.

To briefly summarize (a lot more details are given on Wikipedia), they were essentially artificially manipulating the price of stocks through false information and other means; as well as lying to clients about stocks to make sales.


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