After Belfort's first disaster, he comes back with a continuation of his life after Stratton. I find the author to be very self indulgent, whether it's cheating in business or on his wives, abusing drugs and alcohol, or boasting about how much everything in his house costs. As the Feds close in, Belfort is offered a deal: rat on your friends for a reduced sentence. Jordan takes about ten minutes before quickly agreeing. Even though he is now faced with repaying the staggering sum of over $100 million in restitution, Jordan shows very little remorse for all the people he ripped off. Instead, he seems to whine over being supposedly singled out for something "everyone on Wall Street does". After being barred from the securities industry, Jordan enters an appropriate field: taking advantage of lower income people in the refinancing business.
For those who don't quite grasp what Jordan did, here is a little primer:
Stratton would seek to a company public; lets call it ABC. Stratton would look to raise 6 million dollars by selling 1 million shares at 6. (a lot of these deals were units with warrants attatched, but for the sake of simplicity I'm going to just call them shares. The concept is the same). Three to six months before going public, Stratton would structure a bridge loan to ABC for say $500,000. ABC might need this money to pay legal and accounting expenses. An investor (generally a friend of Jordan's) would put up the money in return for one million shares at $.50.
Six months later, ABC goes public. Stratton's brokers are selling it like crazy, promising investors that the stock is the next Microsoft and ready to go "TO DA MOON!" Lets say instead of selling clients one million shares, they sell them 2 million. Where did the extra million shares come from? Simple. Remember the bridge loan at fifty cents? Well Jordan would pay him two dollars for his stock. The investor makes a quick $1.50/share, or $1.5 million on a $500,000 investment. Not bad. Frequently, the investor would kick back some of these proceeds to Jordan.
Okay, lets go back to the first day of trading. Stratton has virtual total control over the float of the stock by not allowing a broker to sell unless he had a corresponding buy order. Thus, no stock would ever hit the rest of Wall Street. Because Stratton controls the market, they might open the stock up at say, 15. Jordan then goes out to his sales force with a great deal: He will let them but one million shares at 11, and sell them to their clients at 15. The brokers will make $4/share, or over 25%! Why would Jordan offer them stock at 11? Because he took it from the bridge loan investor at 2. So Stratton makes $9/share on one million shares in it's trading acct, plus all the investment banking fees and any kickbacks as well. Remember, they only raised six million (minus fees) for the company. So, Jordan makes over 150% on the money he raised! Sooner or later, the stock collapses, and the investors are left holding stock worth pennies. Needless to say, this is all totally illegal.