Black Monday, 1987

What was the Black Monday?

Monday, October 19, 1987.

The stock markets all around the world crashed, affecting especially the NYSE (Dow Jones), Hong Kong, Australia and most of Europe.

Dow Jones, which was trading at 2272, fell 508 points.

Effects of the crash

He had just received his broker licence at L.F. Rothschild and due to the crash, the company went bankrupt in a matter of days.

He lost his job and Rothschild, which was bigger than Goldman Sachs and Morgan Stanley, shut down.

He?

The opportunity of Pink Sheet Stocks

How they changed Belfort's future

Pink Sheet Stocks

The stocks that do not trade on major stock markets due to their low value. Also called penny stocks, they trade on local markets. They usually do not interest big inverters and are a source of finance for small, upcoming companies.

Pink sheet and Belfort's future

Pink sheet stocks changed Belfort's future. After loosing his job due to the market crash, he worked for a local investment firm in New York called Investors Center which dealt in pink sheet stocks.

He earned a lot through these and this was a huge part in his business strategies in future. 

Stratton Oakmont Inc.

About the Firm

Stratton Oakmont was an Over-the-Counter brokerage firm.

Started with Danny Proush and a few other members, Stratton became the largest OTC firm with stock issues over $1 billion.
It was responsible for launching over 35 IPOs including Steve Madden Ltd.

It's easier to get rich quick when you don't follow the rules.

—Jordan Belfort

What happened inside?

On the outside, Stratton Oakmont was just another aggressive investment firm in New York trying to push as many shares to clients.

But inside, the story was completely different.

The Art of Making Money

How Jordan Belfort made $49 Million in one year

Statutory Disclaimer

The content appearing on the following slides is for representational purposes only.

User discretion is advised.

The author in no way supports or encourages usage of such methods.

Pump and Dump Scheme

P&D is a form of Stock Fraud which involves artificial inflation of the stock price (pumping) in order to sell cheaply purchased stock at a higher price.

Once the price rises, operators sell off all shares (dumping) resulting in price fall. 

Highly prevalent in penny stocks.

Insider Trading

Belfort and other members were also involved Insider Trading schemes. 

Insider Trading refers to illegal dealing in stocks of a company using non-public information.

Highly evident in the Steve Madden Inc. IPO case.

Pushing Penny Stocks

Stratton Oakmont had a unique way of making money. Jordan Belfort's amazing business acumen resulted in the unique selling strategy of pitching Blue Chip stocks to customers and then push Pink Chip for higher profits, after gaining their trust.

But all of this wasn't without consequences.

In the end, The Wolf was brought down...

Trouble with The Law

In 1992, the US SEC sought to end Stratton's shady operations. 2 years later, the SEC imposed a lifelong ban on Belfort. The company was ordered to liquidate to pay off its debts and numerous fines.

in 1999, Belfort pleaded guilty to Money Laundering and Securities Fraud. 

In 2003, he was sentenced to 4 years in jail and $110 Million in restitution.

And now...

Belfort has served 22 months of jail time.

He is now a Motivational Speaker and runs an event called "Straight Line Persuasion" 

He is also a writer and has written 2 memoirs based on which the Martin Scorsese hit "The Wolf of Wall Street", starring Leonardo DiCaprio, was produced.

With great power comes great responsibility

Like our friendly neighbourhood Spiderman, Belfort could have used his powers for the greater good.

a twisted Robin Hood who takes from the rich and gives to himself and his merry band of brokers

—Forbes Magazine on Jordan Belfort

How could it have been

Belfort's amazing talents could have been leveraged to form one of the most sought after entities around the globe.

What if he worked as the true Robin Hood, giving back to people a share of what he earnt?

What if his path was as pure as his ambition to earn?

What if his ethics were as strong as the trust he built among employees and customers alike?

Key message to take home

This is an amazing example of how a person driven by ambition can change his life.

But what we need to learn is not to loose our moral compass, and strive for excellence with good intentions.