Jordan Belfort should know a swindle when he sees one. He wrote the book on it. And the book is being made into a movie.
Belfort's book, The Wolf of Wall Street, is a cautionary tale for the seductive power of easy money and fast living. At age 26, the former Queens meat salesman was a millionaire Wall Street stockbroker. In his early 30s, he earned $1 million a week as chairman of Stratton Oakmont, a rowdy brokerage firm based on Long Island.
Belfort was a poster boy for the extreme wealth that financial bull markets can bring. He had a yacht, a jet, helicopters, mansions, a trophy wife and an army of domestic help, including a personal maid and a pair of marine biologists to care for the pond at the entrance to their estate.
He also had a raging drug habit.
Eventually his yacht sunk and his jet crashed. His marriage followed soon after.
At age 36, Belfort, fresh out of rehab, was indicted for stock manipulation and money laundering. He was court-ordered to repay investors $100 million and sent to a federal prison facility for two years.
While in prison, Belfort took up writing and has authored two books so far. Leonardo DiCaprio's production company has the film rights to his first book, and Martin Scorsese is slated to direct.
Belfort says he has been drug-free for 13 years, and he says he is a changed man.
Top six warning signs
From the vantage point of experience, here are the Wolf of Wall Street's
top six signs that you're dealing with a financial adviser or broker who
is less than forthright.
1. No-name, small-time operators are suspect.
JORDAN BELFORT: First of all, I would never give my money to a no-name brokerage firm or a financial adviser who was not affiliated with a major company. I'm not saying there aren't crooks in big companies but to go with someone on the basis of a phone call or someone who's operating from a business that's very recent, you're taking a huge risk. That, alone, is a tell-tale sign.
2. They provide their own referrals.
BELFORT: Do not look to get one referral or two. Before you give someone a cent, you have to check them out thoroughly. Get character references.
3. Information or research about the company is thin.
BELFORT: It's up to you to do the research. If someone out there is conducting their business well, it's not a secret. You can find it, you can double-check it, you can prove it. Then, you can check it again with authorities.
If someone's got a scheme or an investment model that doesn't quite make sense, you can't quite prove it but everyone's doing well with it, it's bull.
If they have even a partially shady reputation, run the other way.
4. They try to convince you to compromise your ethics, however slightly.
BELFORT: When it comes to money, there's no in-between. Either you're lily white, or you're not. If you cross the line once, you get a taste for it. You can't say, 'Oh, I'll make my money and then I'll become a pillar of society.' It doesn't work that way. I didn't start out ethically bankrupt. I sold my soul a little bit at a time. I crossed over to the dark side through a series of tiny imperceptible steps.
5. They tell you they only offer their services to a select group of people.
BELFORT: Bernie Madoff relied on the oldest hustle of all, which is: 'My club is so exclusive, you want to be a member.' And it worked. He was a classic con man. You wanted to be in Bernie's club and if you weren't in Bernie's club, you were 'less than'. People clamoured to give their money to Bernie Madoff. If you asked questions, he said: 'No no, take your money back."
6. They present an investment scheme that sounds too good to be true.
BELFORT: We all want to believe that there's something out there that's better than reality, that there's a fast way, an easy way, that there's something that's too good to be true. There is nothing that's too good to be true.
We were talking about Bernie Madoff. You give your money to Bernie, you get this amazing return year after year, in up-markets and down-markets. Bernie was a very clever crook and he played on the system like no one's played it before.
A final word of caution: Do not rely on regulators to protect you
BELFORT: Bernie Madoff came about because of a complete and utter
breakdown of the regulatory system.
The SEC (Securities Exchange Commission) sees people as insiders or outsiders. They saw Bernie Madoff as an insider.
I think the SEC is an agency that has seen better days and should be completely eliminated. I don't mean the function should be eliminated, I think the agency itself is just all wrong. It's understaffed and under-capitalised. It needs to be dismantled and rolled into a more effective government agency.
In the Stratton Oakmont days, the SEC sent four teams of investigators to Stratton Oakmont in two years. It was beyond ridiculous. They were kids. They'd come in and they knew nothing about the securities business. I was a crook back then, and went to great lengths to make my activities appear legitimate. How is a kid supposed to sort all that out? We'd give them tens, hundreds of thousands of trading tickets, and while they were busy looking for the smoking gun, we were firing live bazookas under their noses.
