Jordan Belfort, who’s been called various names-"Gordon Gekko," "King," and
"The Wolf of Wall Street"-was once at the top of the world. He made more money
than any working person could fathom, went on jet-setting splurges around the
world using private helicopters, limousines, jets, and yachts, and he lived a
life of unbridled hedonism (read: women, drugs, wild parties, more women). You
can do these kinds of things when you’re making millions of dollars a week,
sometimes in minutes.
Somehow, during this time, he married a trophy wife who adored and tolerated
him-and gave him two children. Life for Belfort, one of the greatest stock
manipulators in history, was a fantasy few could even match in their dreams.
This is a guy whose only fear, while being trapped with his wife and friends in
the midst of a horrific storm at seas, minutes away from capsizing and death,
was in not having enough Quaaludes. Okay, he was bazonkered out of his mind on
his daily over-the-top regimen of drugs and alcohol. But just the same, can you
imagine being fixated by thoughts about little pills to maintain your high (plus
being ecstatic about getting rid of the 170-foot yacht you bought on a whim and
hated) when your life’s got only about five to ten minutes left in its savings
account? Irrational? Yes. You can make a case that fright or outright panic over
your impending death might consume your thoughts.
But then again, you’re not Jordan Belfort, whose audacious life-optioned for
film with Leonardo DiCaprio slated to star and Martin Scorsese to direct-was one
of stuff too crazy to be fiction.
He had a prodigious appetite for drugs and the things an endless supply of money
can do. He feared little-and why should he when he got away with everything?
From head-on car crashes, sunk yachts, and drugged-out helicopter flights where
he dozed off, to his brazen behavior in the face of the SEC, who was
investigating him for all sorts of fraudulent activities-in his very office, no
less-Belfort emerged unscathed. Either through buying his way out of problems
(money is often the best medicine for life’s ills as Belfort would readily
attest) or simply having luck as miraculous as his life, Belfort survived and
Until it all came crashing down.
In an excerpt from his fascinating book, The Wolf of Wall Street, we learn how
Belfort illegally and unethically manipulated the stock market and earned
hundreds of millions of dollars to feed his debauchery (often within the rules
of the system) through Stratton Oakmont, the brokerage firm he founded and built
up into the proverbial 800-pound gorilla.
* * *
Rathole was a Stratton code word for a nominee, a person who owned shares of
stock on paper but was nothing more than a front man. There was nothing
inherently illegal about being a nominee, as long as the appropriate taxes were
being paid and the nominee arrangement didn’t violate any securities laws. In
fact, the use of nominees was prevalent on Wall Street, with big players using
them to build stock positions in a company without alerting other investors. And
as long as you didn’t acquire more than five percent of any one company-at which
point you’d be required to file a 13D disclosing your ownership and
intentions-it was all perfectly legal.
But the way we were using nominees-to secretly buy large blocks of Stratton new
issues-violated so many securities laws that the SEC was trying to invent new
ones to stop us. The problem was that the laws currently on the books had more
holes than Swiss cheese. Of course, we weren’t the only ones on Wall Street
taking advantage of this; in fact, everyone was. It was just that we were doing
it with a bit more panache-and brazenness. I said to Danny [Danny Porush,
Belfort’s second-in-command], "I understand he’s your rathole, but controlling
people with money isn’t as easy as it seems. Trust me on that. I’ve been doing
it longer than you. It’s more about managing your rathole’s future expectations
and less about what you’ve made him in the past. Yesterday’s profits are
yesterday’s news, and, if anything, they work against you. People don’t like
feeling indebted to someone, especially a close friend. So after a while your
ratholes start resenting you. I’ve already lost a few friends that way. You will
too; just give it some time. Anyway, the point I’m trying to make is that
friendships bought with money don’t last very long, and the same goes with
loyalty. That’s why old friends like Wigwam are priceless around here. You can’t
buy loyalty like that; you know what I’m saying?"
Danny nodded. "Yeah, and that’s what I have with Steve."
I nodded sadly. "Don’t get me wrong, I’m not trying to belittle your
relationship with Steve. But we’re talking about eight million bucks here, on
the low side. Depending on what happens with the company, it could be ten times
that." I shrugged. "Who really knows what’s gonna happen? I don’t have a crystal
ball in my pocket-although I do have six Ludes there, and I’ll gladly split them
with you after the market closes!" I raised my eyebrows three times in rapid
Danny smiled and gave me the thumbs-up sign. "I’m in like Flynn!"
I nodded. "Anyway-in all seriousness-I will tell you that I got a really good
feeling about this one. I think this company’s got a shot of hitting it out of
the park. And if it does, we have two million shares. So do the math, pal: At a
hundred bucks a share that’s two hundred million bucks. And that kind of money
makes people do strange things. Not just Steve Madden."
Danny nodded and said, "I understand what you’re saying, and there’s no doubt
that you’re the master at this stuff. But I’m telling you, Steve is loyal. The
only problem is how to get that kind of money from him. He’s a slow payer as it
It was a valid point. One of the problems with ratholes was figuring out how to
generate cash without raising any red flags. It was easier said than done,
especially when the numbers went into the millions. "There are ways," I said
confidently. "We could work some of it out with some sort of consulting
contract, but if the numbers go into the tens of millions we’ll have to consider
doing something with our Swiss accounts, although I’d like to keep that under
wraps as much as possible. Anyway, the way things are going we have bigger
issues than just Steve Madden Shoes-like the fifteen other companies in the
pipeline just like Madden. And if I’m having trouble trusting Steve, well, most
of the people I hardly even know."
Danny said, "Just tell me what you want me to do with Steve and I’ll get it
done. But I’m still telling you that you don’t need to worry about him. He sings
your praises more than anyone."
I was well aware of how Steve sang my praises, perhaps too aware. The simple
fact was that I had made an investment in his company and taken eighty-five
percent in return, so what did he really owe me? In fact, unless he was the
reincarnation of Mahatma Gandhi, he had to resent me-at least somewhat-for
grabbing such a large percentage of his namesake.
And there were other things about Steve that bothered me, things that I couldn’t
share with Danny-namely, that Steve had made subtle intimations to me that he
would prefer to deal directly with me than through Danny. And while I had no
doubt that Steve was simply trying to earn brownie points with me, his strategy
couldn’t have been more off the mark. What it proved was that Steve was cunning
and manipulative-and, most importantly, in search of the Bigger Better Deal. If
somewhere down the line he found a Bigger Better Deal than me, all bets would be
Right now Steve needed me. But it had little to do with Stratton raising him $7
million and even less to do with the approximately $3 million Danny had made him
as his rathole. That was yesterday’s news. Going forward, my hold on Steve was
based on my ability to control the price of his stock after it went public. As
Steve Madden’s dominant market maker, virtually all the buying and selling would
occur within the four walls of Stratton’s boardroom-which would afford me the
opportunity to move the stock up and down as I saw fit. So if Steve didn’t play
ball, I could literally crush the price of his stock until it was trading in
It was this very ax, in fact, that hung over the heads of all Stratton Oakmont’s
investment-banking clients. And I used it to ensure that they stayed loyal to
the Stratton cause, which was: to issue me new shares, below the prevailing
market price, which I could then sell at an enormous profit, using the power of
Of course, I wasn’t the one who’d thought up this clever game of financial
extortion. In fact, this very process was occurring at the most prestigious
firms on Wall Street-firms like Merrill Lynch and Morgan Stanley and Dean Witter
and Salomon Brothers and dozens of others-none of whom had the slightest
compunction about beating a billion-dollar company over the head if they chose
not to play ball with them.
It was ironic, I thought, how America’s finest and supposedly most legitimate
financial institutions had rigged the treasury market (Salomon Brothers);
bankrupted Orange County, California (Merrill Lynch); and ripped off grandmas
and grandpas to the tune of $300 million (Prudential-Bache). Yet they were all
still in business-still thriving, in fact, under the protection of a WASPy
But at Stratton Oakmont, where our business was microcap investment banking-or,
as the press liked to refer to it, penny stocks-we had no such protection. In
reality, though, all the new issues were priced between four and ten dollars and
weren’t actually penny stocks. It was a distinction that was entirely lost on
the regulators, much to their own chagrin. It was for this reason that the bozos
at the SEC-especially the two who were now camped out in my conference room-were
unable to make heads or tails out of a $22 million lawsuit they’d filed against
me. In essence, the SEC had engineered their lawsuit as if Stratton were a
penny-stock firm, but the simple fact was that Stratton Oakmont bore no
resemblance to such.
Penny-stock firms were notoriously decentralized, having dozens of small offices
spread throughout the country. Yet, Stratton had only one office, which made it
easier to control the negativity that would spread throughout a sales force
after the SEC filed a lawsuit. Usually that alone was enough to force a
penny-stock firm out of business. And penny-stock firms would target
unsophisticated investors, who had little or no net worth, and convince them to
speculate with a couple of thousand dollars, at most. Stratton, on the other
hand, targeted the wealthiest investors in America, convincing them to speculate
with millions. In consequence, the SEC couldn’t make their usual claim that
Stratton’s clients weren’t suitable to risk their money in speculative stocks.
But none of this had occurred to the SEC before they filed their lawsuit.
Instead, they mistakenly assumed that the bad press would be enough to drive
Stratton out of business. But with only one office to manage, it had been easy
to keep the troops motivated, and not a soul left. And it was only after the SEC
had already filed their lawsuit that they finally got around to reviewing
Stratton’s new-account forms and it dawned on them that all Stratton’s clients
What I had done was uncover a murky middle ground-namely, the organized selling
of five-dollar stocks to the wealthiest one percent of Americans, as opposed to
selling penny stocks (priced under a dollar) to the other ninety-nine percent,
who had little or no net worth. There was a firm on Wall Street, DH Blair, that
had danced around the idea for more than twenty years but had never actually hit
the nail on the head. In spite of that, the firm’s owner, J. Morton Davis, a
savage Jew, had still made a bloody fortune in the process and was a Wall Street
But I had hit the nail on the head, and by sheer luck I’d hit it at exactly the
right moment. The stock market was just beginning to recover from the Great
October Crash, and chaos capitalism still reigned supreme. The NASDAQ was coming
of age and was no longer considered the redheaded stepchild of the New York
Stock Exchange. Lightning-fast computers were appearing on every desk- sending
ones and zeroes whizzing from coast to coast-eliminating the need to be
physically located on Wall Street. It was a time of change, a time of upheaval.
And as volume on the NASDAQ soared, I, coincidentally, was embarking on an
intensive three hour-a-day training program with my young Strattonites. From out
of the smoldering ashes of the Great Crash, the investment banking firm of
Stratton Oakmont was born. And before any regulator knew what hit, it had ripped
through America with the force of an atomic bomb.
Just then an interesting thought occurred to me, and I said to Danny, "What are
those two idiots from the SEC saying today?"
"Nothing really," he replied. "They’ve been pretty quiet, talking mostly about
the cars in the parking lot, the usual shit." He shrugged. "I’ll tell you, these
guys are totally fucking clueless! It’s like they don’t even know we’re doing a
deal today. They’re still looking at trading records from 1991."
"Hmmm," I said, rubbing my chin thoughtfully. I wasn’t all that surprised at
Danny’s response. After all, I’d been bugging the conference room for over a
month now and was gathering counterintelligence against the SEC on a daily
basis. And one of the first things I’d learned about securities regulators
(besides them being completely devoid of personality) was that one hand had no
idea what the other hand was doing. While the SEC bozos in Washington, D.C.,
were signing off on the Steve Madden IPO, the SEC bozos in New York were sitting
in my conference room, entirely unaware of what was about to transpire.
"What’s the temperature in there?" I asked with great interest. Danny shrugged.
"High fifties, I think. They’ve got their coats on."
"For Chrissake, Danny! Why is it so fucking warm in there? I told you-I want to
freeze those bastards right back to Manhattan! What do I have to do, call a
fucking refrigeration guy in here to get the job done? I mean, really, Danny, I
want icicles coming out of their fucking noses! What about this don’t you
Danny smiled. "Listen, JB: We can freeze ’em out or we can burn ’em out. I can
probably get one of those little kerosene heaters installed right in the
ceiling, and we can make the room so hot they’ll need salt pills to stay alive.
But if we make the place too uncomfortable, they might leave, and then we won’t
be able to listen to them anymore."
* * *
At one p.m., the geniuses down at the National Association of Securities
Dealers, the NASD, released Steve Madden Shoes for trading on the NASDAQ stock
exchange under the four letter trading symbol SHOO: pronounced shoe. How cute
and appropriate that was!
And as part of their long-standing practice of having their heads up their
asses, they reserved the distinguished honor of setting the price for the
opening tick for me, the Wolf of Wall Street. It was just another in a long line
of ill-conceived trading policies that were so absurd that they all but assured
that every new issue coming out on the NASDAQ would be manipulated in one way or
another, regardless of whether or not Stratton Oakmont was involved in it.
Just why the NASD had created a playing field that so clearly fucked over the
customer was something I’d thought about often, and I’d come to the conclusion
that it was because the NASD was a self-regulatory agency, "owned" by the very
brokerage firms themselves. (In fact, Stratton Oakmont was a member too.)
In essence, the NASD’s true goal was to only appear to be on the side of the
customer and to not actually be on the side of the customer. And, in truth, they
didn’t even try too hard to do that. The effort was strictly cosmetic, just
enough to avoid raising the ire of the SEC, who they were compelled to answer
So instead of allowing the natural balance between buyers and sellers to dictate
where a stock should open, they reserved that incredibly valuable right for the
lead underwriter, which in this particular case was me. I could choose whatever
price I deemed appropriate, as arbitrary and capricious as it might be. In
consequence, I decided to be very arbitrary and even more capricious, and I
opened the units at $5.50 per, which afforded me the glorious opportunity of
repurchasing my one million rathole units just there. And while I won’t deny
that my ratholes would have liked to hold on to the units for a weeeee bit
longer, they had no choice in the matter. After all, the buyback had been
prearranged (a definite regulatory no-no), and they had just made a profit of
$1.50 per unit for doing nothing and risking nothing-having bought and sold the
units without even paying for the trade. And if they wanted to be included in
the next deal, they had better follow the expected protocol, which was to shut
the fuck up and say, "Thank you, Jordan!" and then lie through their teeth if
they were ever questioned by a federal or state securities regulator as to why
they sold their units so cheaply.
Either way, you really couldn’t question my logic in the matter. By 1:03
p.m.-just three minutes after I’d bought back my rathole units at $5.50 per-the
rest of Wall Street had already driven the units up to $18. That meant I had
locked in a profit of $12.5 million- $12.5 million! In three minutes! I’d made
another million or so in investment-banking fees and stood to make another three
or four million a few days from now-when I bought back the bridge-loan units,
which were also in the hands of my ratholes. Ahhhh- ratholes! What a concept!
And Steve himself was my biggest rathole of all. He was holding 1.2 million
shares for me, the very shares NASDAQ had forced me to divest. At the current
unit price of $18 (each unit consisting of one share of common stock and two
warrants), the actual share price was $8. That meant that the shares Steve was
holding for me were now worth just under $10 million! The Wolf strikes again!
It was now up to my loyal Strattonites to sell all this inflated stock to their
clients. All this inflated stock-not just the one million units they had given
to their own clients as part of the initial public offering but also my one
million rathole units that were now being held in the firm’s trading account,
along with 300,000 bridge-loan units I would be buying back in a few days…and
then some additional stock I had to buy back from all the brokerage firms that
had pushed the units up to $18 (doing the dirty work for me). They would be
slowly selling their units back to Stratton Oakmont and locking in their own
profit. All told, by the end of the day, I would need my Strattonites to raise
approximately $30 million. That would more than cover everything, as well as
give the firm’s trading account a nice little cushion against any
pain-in-the-ass short-sellers, who might try to sell stock they didn’t even own
(with the hopes of driving the price down so they could buy it back cheaper in
the future). Thirty million was no problem for my merry band of brokers,
especially after this morning’s meeting, which had them pitching their hearts
and souls out like never before.
At this particular moment I was standing inside the firm’s trading room-looking
over the shoulder of my head trader, Steve Sanders. I had one eye on a bank of
computer monitors directly in front of Steve, while my other eye looked out a
plate-glass window that faced the boardroom. The pace was absolutely frenetic.
Brokers were screaming into their telephones like wild banshees. Every few
seconds a young sales assistant with a lot of blond hair and a plunging neckline
would come running up to the plate-glass window, press her breasts against it,
and slip a stack of buy tickets through a narrow slot at the bottom. Then one of
four order clerks would grab the tickets and input them into the computer
network- causing them to pop up on the proprietary trading terminal in front of
Steve, at which point he would execute them in accordance with the current
As I watched the orange-diode numbers flash across Steve’s terminal, I felt a
twisted sense of pride over how those two morons from the SEC had been sitting
in my conference room, searching the historical record for some sort of smoking
gun, while I fired off a live bazooka under their noses. But I guess they’d been
too busy freezing to death, as we listened to every word they said.
By now, more than fifty different brokerage firms were participating in the
buying frenzy. What they all had in common, though, was that each one fully
intended on selling every last share back to Stratton Oakmont at the end of the
day, at the very top of the market. And with other brokerage firms doing the
buying, it would now be impossible for the SEC to make the case that I had been
the one who’d manipulated the units to $18. It was elegantly simple. How could I
be at fault if I hadn’t been the one who’d driven the price of the stock up? In
fact, I had actually been a seller the whole way. And I had sold the other
brokerage firms just enough to wet their beaks, so they would continue to
manipulate my new issues in the future-but not too much that it would become a
major burden to me when I had to buy the stock back at the end of the trading
day. It was a careful balance to strike, but the simple fact was that having
other brokerage firms bidding up the price of Steve Madden Shoes created
plausible deniability with the SEC. And, in a month from now, when they were
subpoenaing my trading records, trying to reconstruct what had happened in those
first few moments of trading, all they would see was that brokerage firms across
America had bid up the price of Steve Madden Shoes, and that would be that.
Before I left the trading room, my final instructions to Steve were that under
no circumstances was he to let the stock drop below $18. After all, I wasn’t
about to shaft the rest of Wall Street after they’d been kind enough to
manipulate my stock for me.
* * *
By four p.m. it was one for the record books. The trading day was over, and the
news that Steve Madden Shoes had been the most actively traded stock in America
and, for that matter, the world had come skidding across the Dow Jones wire
service for one and all to see. The world! Such audacity! Such sheer audacity!
Oh, yes, Stratton Oakmont had the power, all right. In fact, Stratton Oakmont
was the power, and I, as Stratton’s leader, was wired into that very power and
sat atop its pinnacle. I felt it surge through my very innards and resonate with
my heart and soul and liver and loins. With more than eight million shares
changing hands, the units had closed just below $19, up five hundred percent on
the day, making it the largest percentage gainer on the NASDAQ, the NYSE, the
AMEX, as well as any other stock exchange in the world. Yes, the world-from the
OBX exchange way up north in the frozen wasteland of Oslo, Norway, all the way
down south to the ASX exchange in the kangaroo paradise of Sydney, Australia.
Right now I was standing in the boardroom, casually leaning against my office’s
plate-glass window, with my arms folded beneath my chest. It was the pose of the
mighty warrior after the fray. The mighty roar of the boardroom was still going
strong, but the tone was different now. It was less urgent, more subdued.
It was almost celebration time. I stuck my right hand in my pants pocket and did
a quick check to make sure my six Ludes hadn’t fallen out or simply vanished
into thin air. Quaaludes had a way of vanishing sometimes, although it usually
had more to do with your "friends" snatching them from you-or you getting so
stoned that you took them yourself and simply didn’t remember. That was the
fourth phase of a Quaalude high and, perhaps, the most dangerous: the amnesia
phase. The first phase was the tingle phase, next came the slur phase, then the
drool phase, and then, of course, the amnesia phase.
Anyway, the drug-god had been kind to me, and the Quaaludes hadn’t vanished. I
took a moment to roll them around in my fingertips, which gave me an irrational
sense of joy. Then I began the process of calculating the appropriate time to
take them, which was somewhere around 4:30 p.m., I figured, twenty-five minutes
from now. That would give me fifteen minutes to hold the afternoon meeting, as
well as enough time to supervise this afternoon’s act of depravity, which was a
One of the young sales assistants, who was strapped for cash, had agreed to put
on a Brazilian bikini and sit down on a wooden stool at the front of the
boardroom and let us shave her head down to the skull. She had a great mane of
shimmering blond hair and a wonderful set of breasts, which had recently been
augmented to a D cup. Her reward would be $10,000 in cash, which she would use
to pay for her breast job, which she’d just financed at twelve percent. So it
was a win-win situation for everyone: In six months she’d have her hair back,
and she’d own her D cups debt free.
I couldn’t help but wonder if I should’ve allowed Danny to bring a midget into
the office. After all, what was so wrong with it? It sounded a bit off at first,
but now that I’d had a little time to digest it, it didn’t seem so bad.
In essence, what it really boiled down to was that the right to pick up a midget
and toss him around was just another currency due any mighty warrior, a spoil of
war, so to speak. How else was a man to measure his success if not by playing
out every one of his adolescent fantasies, regardless of how bizarre it might
be? There was definitely something to be said for that. If precocious success
brought about questionable forms of behavior, then the prudent young man should
enter each unseemly act into the debit column on his own moral balance sheet and
then offset it at some future point with an act of kindness or generosity (a
moral credit, so to speak), when he became older and wiser and more sedate.
Yet, on the other hand, we might just be depraved maniacs-a self-contained
society that had spiraled completely out of control. We Strattonites thrived on
acts of depravity. We counted on them, in fact; I mean, we needed them to
It was for this very reason that, after becoming completely desensitized to
basic acts of depravity, the powers that be (namely, me) felt compelled to form
an unofficial team of Strattonites-with Danny Porush as its proud leader-to fill
the void. The team acted like a twisted version of the Knights Templar-whose
never-ending quest to find the Holy Grail was the stuff of legend. But unlike
the Knights Templar, the Stratton knights spent their time scouring the four
corners of the earth for increasingly depraved acts, so the rest of the
Strattonites could continue to get off. It wasn’t like we were heroin junkies or
anything as tawdry as that; we were unadulterated adrenaline junkies, who needed
higher and higher cliffs to dive off and shallower and shallower pools to land
* * *
Excerpted from The Wolf of Wall Street by Jordan Belfort. Copyright © 2007 by
Jordan Belfort. Published by arrangement with The Bantam Dell Publishing Group,
a division of Random House, Inc.