|Industry||Investment banking, stock exchange|
|Headquarters||Long Island, New York, United States|
Stratton Oakmont, Inc. was a Long Island, New York, "over-the-counter" brokerage house founded by Jordan Belfort. It defrauded many shareholders leading to the arrest and incarceration of several executives, and the closing of the firm.
Jordan Belfort founded the firm of Stratton Oakmont in 1989 with Danny Porush. Earlier, Belfort opened a franchise of Stratton Securities, a minor league broker-dealer, and then bought out the whole firm. Stratton Oakmont was the largest OTC firm in the country during the late 1980s and 1990s. The firm was responsible for the initial public offering of 35 companies, including Steve Madden Ltd. Stratton Oakmont did not have a product control function to verify prices of its positions and monitor trading activity. 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. Stocks that are the subject of pump and dump schemes are sometimes called "chop stocks".
The firm was the subject of numerous disciplinary actions brought by the NASD beginning in 1989. The firm was shut down in 1996, and in 1998 Belfort and Porush were indicted for securities fraud and money laundering.
Belfort and Porush later pleaded guilty to ten counts of securities fraud and money laundering, admitting that for seven years they operated a scheme in which they manipulated the stock of at least 34 companies. As part of their plea deal, they received less prison time, and cooperated with prosecutors in their investigations of other brokerage houses.
In popular culture
The 2013 movie The Wolf of Wall Street is a drama based on the memoirs of Jordan Belfort, directed by Martin Scorsese. Leonardo Dicaprio stars as Jordan Belfort and Jonah Hill plays fictional character Donnie Azoff, who is loosely based on Danny Porush.
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