PDF Summary:The Wolf of Wall Street, by Jordan Belfort

“Sex, drugs, and stock manipulation” are the words that describe the world of Jordan Belfort and his brokerage firm, Stratton Oakmont. Belfort and his staff of young traders became incredibly rich via illegal trading practices, then used their wealth to indulge their every hedonistic whim. The Wolf of Wall Street is Belfort’s confessional memoir of his illegal actions, which led to a self-destructive spiral into drug addiction and life-threatening behavior.

In this guide, we’ll explain how Belfort grew his wealth through stock manipulation and money laundering, how he attempted to evade prosecution for his crimes, and how his lifestyle of drug abuse and self-indulgence almost killed him before he accepted the need to change. This guide will also examine whether Belfort’s crimes are still commonplace in modern finance, how the acquisition of wealth affects people, and how drug addiction and recovery can alter a person’s self-awareness and sense of accountability.

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Manipulation Via Proxy

Belfort hid the amount of stock he owned by making use of proxies—people who held the stock on Belfort’s behalf while owning it in name only. In the case of the Madden IPO, Belfort’s biggest proxy was Steve Madden himself. Prior to the IPO, Stratton Oakmont was required to transfer ownership of Steve Madden stock back to Madden, but this was done with the understanding (based on mutual trust) that Belfort was still the true owner of the shares. Belfort writes that this is legal so long as the shares don’t constitute more than 5% of the company, whereas Belfort’s proxy shares made up more than 50% of the business, including all the shares owned by other Belfort proxies whom Madden didn’t know anything about.

(Shortform note: Belfort’s use of proxies—commonly referred to as nominee accounts—isn’t actually illegal, though hiding them is a common way to disguise a person’s or business entity’s assets, often for illicit reasons. Any nominee who owns more than 5% of the shares in a business must register with the SEC, and nominees who own more than 25% of a business become what is known as “beneficial owners” whose status as such must be legally verified by any banks with whom the business has an account. In order to fight the rampant fraud that proxy ownership enables, the World Bank is pushing for countries to adopt regulations increasing transparency in global asset ownership.)

Belfort argues these tactics are so common that Wall Street practices are rigged to facilitate stock manipulation. For instance, before the IPO began, Madden stock was valued at $4 per share, but stock market rules let Belfort set the opening price at $5.50 per share, inflating it before trading even started. All day, Stratton traders forced the price up while selling to investors, but they also sold to other investment firms, who eagerly participated in shooting the stock price higher and higher, with the unspoken agreement that Stratton Oakmont would buy back the inflated shares before the close of trading. At the end of the day, Belfort and Stratton Oakmont still owned a controlling interest in Madden Shoes, now valued at $19 per share.

(Shortform note: For Belfort to manipulate Madden’s stock price without disclosing his controlling interest in the company is the very definition of insider trading. Insider trading often goes unpunished due to murky disclosure regulations and complex ownership structures, which Belfort took full advantage of. As for the assist Belfort got from other Wall Street investment firms, the US Justice Department has become concerned that investment banks may be colluding to drive up consumer prices, not only stock prices. The issues may actually be more wide-ranging than a handful of brokers enriching themselves at their investors’ expense.)

Money Laundering

While it’s one thing to make illicit riches, hiding and accessing your money once you’ve earned it poses a new set of problems. Money laundering—the process of converting wealth obtained illegally into seemingly legitimate income—is an industry that Belfort says the Swiss banking system is particularly geared toward, using secret accounts, fictitious corporations, and covert mechanisms to transfer money back to the US under the guise of innocuous transactions.

Belfort traveled to Switzerland in secret, but once he was there, the bankers he met spoke openly about how the Swiss banking system conceals huge sums of money and how it’s their policy to not cooperate with foreign institutions, such as the US’s SEC. Because the practice of issuing “numbered” bank accounts with no name attached stopped after World War II, Belfort’s first step was to open accounts in the names of proxies, much like those who held his stock. These people would have the unenviable task of smuggling large amounts of cash across the border, so Belfort had to use people he could trust who were also unlikely to arouse suspicion—including his elderly British aunt and one of his drug dealers’ Swiss extended family.

(Shortform note: Even before Belfort’s money laundering scheme, the Swiss banking system’s penchant for hiding money had become public knowledge thanks to the scandals involving Philippine president Ferdinand Marcos, who embezzled vast sums of his nation’s wealth and hid it in various Swiss bank accounts. In spite of promises by the Swiss government to curb its banking system’s illicit practices, a report published in 2022 revealed that Swiss banks still hold billions of dollars in accounts owned by criminals and corrupt political regimes. While the Swiss attempt to crack down further on the lack of transparency in their banking system, the mechanism by which money is laundered remains essentially the same as in Belfort’s day.)

To access and control his overseas funds, Belfort writes that his bankers introduced him to a specialist in creating fictitious corporations. This person would generate “bearer companies” that wouldn’t have Belfort’s name on them at all—ownership would be established through physical stock certificates that Belfort would possess. This person would act as Belfort’s corporate proxy, falsifying documents to make his companies look real and conducting business on Belfort’s behalf. For anything Belfort wanted to do—for example, transferring funds from business A to B—this specialist would concoct a paper trail to make the transfer seem justified.

(Shortform note: Other financial criminals have shown that it isn’t necessary to use fake corporations to funnel illicit wealth—if you’re brazen enough, real corporations and corrupt governments can serve the same basic function. In Billion Dollar Whale, Tom Wright and Bradley Hope describe how Malaysian financier Jho Low manipulated his political contacts to gain control of Malaysia’s sovereign wealth fund, which he used in conjunction with a Saudi oil company to siphon wealth into his private accounts. As with Belfort, many banks turned a blind eye to Low’s dealings since they also stood to profit from his transactions, but unlike Belfort, Low’s schemes revolved around real corporations and government money.)

Belfort lists two ways these fake corporations let him move money back to the US. One was by using a US legal loophole called Regulation S, which exempted overseas companies from certain restrictions on US investors. By going through his Swiss businesses, Belfort could invest in the US stock market in ways that he couldn’t as a US citizen. The other way of moving his money back home was through a practice called “transfer pricing,” in which one of his overseas companies would overpay a US business he owned for services or merchandise that may not even exist except on paper. By creating fake companies all over the world, Belfort could move money anywhere under the guise of seemingly mundane business dealings.

Gray Areas in International Finance

The two mechanisms Belfort used to shift money both have legitimate financial applications. The Regulation S rule that Belfort exploited was originally intended to facilitate international investments, though bad actors in the US financial market immediately began to make use of its loopholes. The SEC tightened its regulations in 1998 to prevent people like Belfort from masquerading as foreign entities to make illegal investments in the US stock market.

The other tactic, “transfer pricing,” also has legitimate uses. Many multinational corporations exist as separate legal entities in each country in which they operate. To move assets from one country into another—for example, when a German brewery ships bottles of beer to its US warehouse—it has to set a fair transfer price for its German office to sell its inventory to its separate US counterpart. People like Belfort abuse this system by setting unfair prices that shift wealth from one business to another, sometimes as a means for laundering money and sometimes as a way to avoid taxation by shifting profits to countries with lower tax rates.

The Consequences of Belfort’s Lifestyle

Despite the fact that it was his financial misdealings that eventually landed Belfort in prison, it was his excessive lifestyle that almost destroyed him before the law caught up. Belfort’s addictions to drugs, sex, and risk-taking behavior continued to dominate his life even after he left Stratton Oakmont behind. Belfort describes his half-hearted attempt to back away from the firm to avoid prosecution, how his life during his “early retirement” became a downward spiral of drug use, depression, and self-destruction, and how he was eventually forced to choose between rehab and death.

The Getaway Attempt

In 1994, the SEC offered Belfort a deal that would have given him an escape from Stratton Oakmont and its whirlwind of chaos. The SEC agreed to end its criminal investigation if Belfort stepped away from his firm and left securities trading for good. Belfort would reluctantly take the SEC’s deal, but he wouldn’t honor it in spirit—instead setting himself up as an outside adviser who’d help to steer Stratton Oakmont from behind the scenes.

After years of trying to pin Stratton Oakmont down for stock manipulation, the SEC grew tired of pursuing its case and offered to let Belfort settle out of court if he agreed to a token $3 million fine and to leave the brokerage industry forever. Belfort writes that he didn’t believe the SEC had a solid case to make against him, but his lawyers persuaded him that if the investigation kept going on, it would eventually turn up something damning. Therefore, he agreed to step aside and hand the reins of the firm to Danny Porush, who’d always been his right-hand man—and whose wild behavior outmatched Belfort’s. Belfort would be free to enjoy his fortune, along with his wife, his young children, and their friends.

(Shortform note: To be clear, the SEC cannot bring criminal charges against people like Belfort whom it investigates, but it works in tandem with the US Department of Justice in cases where criminal actions may be involved. However, because of the lack of prosecutions after the 2008 financial crisis, many people believe that the Justice Department and the SEC go easy on so-called “white collar crime.” In Big Dirty Money, Jennifer Taub contends that the legal system uses a skewed outlook on financial criminality that targets low-level Wall Street employees while letting those higher up the ladder off the hook.)

More than just an escape from prosecution, the SEC’s deal could have given Belfort a graceful exit from the extravagant culture he’d created, but the thought of leaving the stock trading business never crossed Belfort’s mind. Rather, Belfort chose to stay in the game as a private investor while setting up an office next door to Stratton Oakmont, acting as the firm’s back-room adviser. Belfort says he was overjoyed that he’d no longer have to trade stock through proxies—as a private individual, he’d be able to trade as much as he wanted without having to hide his transactions.

(Shortform note: Belfort’s reluctance to leave trading behind points to the broader question of why the wealthy don’t simply retire once they’ve earned more money than they could ever spend. One reason is that many successful businessmen are afraid that the businesses they built might fail if they give up control to someone else. Others worry about adjusting to a life without the structure and sense of personal fulfillment that their careers provide. For some of the wealthiest people, however, their entire sense of social status and self-worth is tied up in how much money they make—they can’t ever slow down because to do so would mean losing status in the eyes of their ultra-wealthy peers.)

Alas, Belfort writes that all wasn’t well in his new paradise. Madden, Belfort’s proxy owner of Steve Madden Shoes, began to show signs that he wouldn’t turn over the stock he’d been holding on Belfort’s behalf. Meanwhile, Belfort started hearing rumors about Porush’s mismanagement of Stratton Oakmont. To top it all off, as soon as the SEC investigation closed, Belfort learned that the FBI had begun its own investigation—this one aimed at him and not his former firm.

(Shortform note: Though Belfort and Porush would both serve time in prison as a result of the FBI’s investigation, Porush takes issue with Belfort’s depiction of events in this book, stating that Belfort’s claims are often inaccurate and complaining that Belfort used Porush’s real name while disguising the identities of other figures in the narrative. After his release from prison, Porush became an executive at a company selling medical devices—a business the FBI investigated in 2015 after allegations of Medicare fraud by a former employee.)

The Downward Spiral

Despite Belfort’s previous assertion that money was able to solve any problem, his riches did nothing but fuel his drug use and enabled him to endanger himself in ways that only the super-wealthy can. Belfort recounts his worsening drug addiction, the self-destructive behavior it inspired, and the damage done to his family life, and his head-on collision with depression and attempted suicide before giving in to professional help.

Belfort says that while he’s done many drugs, his primary addictions were to sex and to methaqualone, commonly known as “Quaalude,” which was prescribed to him after a back injury. He eventually became hooked on the pills and used them for their high instead of pain relief. Belfort was on a particularly strong Quaalude high when he learned that the FBI was after him for money laundering. He rushed home, delirious on drugs, crashed into seven cars, and injured one person. For once, the police arrested Belfort, though as always before, he suffered no consequences—this time thanks to a friend who knew a judge.

(Shortform note: Quaaludes were developed in 1951 as a sedative, not a painkiller as Belfort suggests. The drug was heavily prescribed in the 1970s, but by the early ’80s, its dangerously addictive nature and side effects caused it to be banned in the US. How Belfort could be prescribed Quaaludes for back pain years after their production was outlawed is unclear. Quaaludes’ side effects include depression, memory loss, neurological problems, and respiratory issues. As dangerous as Quaaludes are, the withdrawal symptoms for those who suddenly stop taking them can include seizures, vomiting, weakness, and confusion.)

In 1996, Belfort’s doctors found a way to treat his pain without the use of Quaaludes, but that didn’t stop Belfort from using them. He, his wife, and their friends went to Rome, where he and his friends were so high on drugs that Belfort insisted his yacht be put to sea in the face of an oncoming storm. The storm turned into a massive gale with 50-foot waves, endangering the lives of everyone onboard, though Belfort recalls that he and his friends prioritized saving their drugs over themselves. The Italian navy rescued Belfort and his crew shortly before his yacht sank in the storm, and even though Belfort would not be held accountable, he promised himself and his wife he’d quit the Quaaludes.

(Shortform note: The storm that Belfort sailed his yacht into was caused by a mistral—a powerful northwesterly wind that blows into the Mediterranean from France. While mistral storms are often navigable, the one that sank Belfort’s ship was particularly powerful. Though mistrals have been known to reach hurricane force, ashore in France the mistral brings sunny weather and cool waters along the coast.)

Accountability and the Rich

When wealthy people such as Belfort aren’t held accountable for their actions, such as crashing cars or sinking yachts, it creates more than a simple double standard. While vices and criminal recklessness are brushed off as eccentricities for the rich, the impoverished are stigmatized and denied vital resources for the same behavior. This can become a life-or-death issue, as restrictions on aid programs based on these behaviors can shorten the lives of less wealthy people while the rich go unpunished.

Some argue that this double standard has created the public perception that our entire social structure is rigged to benefit the wealthy at everyone else’s expense, potentially endangering the fabric of society. Perhaps the most well-known example of class-based justice inequality is the “affluenza” defense, a legal argument that people who live in the sheltered world of the wealthy aren’t mentally equipped to understand the consequences of their actions—and therefore can’t be held liable for them. However, most arguments addressing justice inequality focus on wealth redistribution, not an overhaul of the criminal justice system.

Fear and Loathing in Long Island

In a way, Belfort kept his promise. By 1997, he’d reduced his use of Quaaludes by replacing them with cocaine. He writes that his cocaine use, however, led to insomnia, paranoia, and instances of violence at home—such as when he destroyed his furniture with a knife while looking for a missing stash of drugs. He even threatened his wife Nadine, and when she told him that she was leaving, he burned her clothes in retaliation. Afraid that she would return to take their children, he planned to take so many drugs that he wouldn’t have to sleep—he’d always be on alert.

(Shortform note: The escalation in Belfort’s drug abuse isn’t uncommon for the deeply addicted. Drugs engage the brain’s reward cycle, but over time, the body adjusts to the drug’s ongoing effect on the nervous system, requiring larger doses to achieve the same result—or else, switching drugs entirely to recreate a similar high. Because the dopamine and serotonin that form the brain’s reward system are produced by our own bodies, the same cycle of stimulus, adaptation, escalation, and dependency occurs in forms of addiction not related to drugs at all, such as gambling addiction, porn addiction, or even addiction to work and exercise.)

Nadine did indeed come back for their children. A fight ensued in which Belfort says he kicked his wife down a flight of stairs before bundling their daughter into his car and driving it straight through their garage door. Belfort was arrested again, and after his arraignment, his lawyer suggested he lie low in Florida and let things cool down. Just as before, Belfort decided to cope with his situation by staying high on drugs every moment of the day. If he came down for even a moment, he’d have to confront the mess he’d made of his life.

(Shortform note: The interplay between drug abuse and domestic violence is complex—one doesn’t necessarily lead to the other, though in cases such as the one Belfort describes, the two can exacerbate each other. Drug addiction leads to a loss of control, while domestic violence springs from a desire to control others. Drug use brings a loss of inhibitions and an altered mental state that can increase an addict’s urge to control something while removing any moral compunctions they may have against using violence to do so. However, research shows that drug addiction doesn’t cause domestic violence. Many domestic abusers aren’t addicts at all, and those who are remain domestic abusers even when they’re sober.)

Rock Bottom and Recovery

Belfort had hit the lowest point of his life. Since drugs had become his only refuge, he couldn’t see any way out of his situation that didn’t involve drugs as part of the solution. Belfort describes his head-on collision with depression and attempted suicide before giving in to professional help, as well as the peace and self-awareness that came after.

In a fit of anger and depression, Belfort attempted suicide by taking morphine pills, though he argues that it wasn’t a real suicide attempt because he knew a friend of his was near and would be able to save him. After having the morphine pumped out of his system, Belfort was placed on an involuntary psychiatric hold, during which Nadine arranged for an intervention—she let Belfort know that unless he went to rehab, he’d never see her again. Belfort’s interventionist explained that he and Nadine were deeply codependent in that she’d been enabling his rampant drug use while he took advantage of his power in their marriage.

(Shortform note: In Codependent No More, Melody Beattie defines codependency as a prolonged stress reaction in which someone such as Belfort’s wife Nadine becomes so obsessed with another person that they lose sight of themselves and their boundaries. To break out of codependency, you must first detach from your unhealthy dependency on the other person and focus on your own emotional needs. While Nadine arguably took this first step by leaving Belfort and refusing to see him, she was still tending to his needs by pressuring for his admission into rehab.)

Once in rehab, Belfort asserts that his urge to do drugs simply turned itself off, though he felt his sex addiction would remain more of a problem. He slowly opened up to his fellow rehab patients, while admitting to himself that he ought to be dead from the sheer amount of drugs he’d been taking. He returned to New York where he was able to stay sober, though his recovery sponsor pointed out to him that even though he’d stopped using drugs, he was still in danger of repeating the behaviors that he’d used the drugs to justify.

Involuntary Holds and Rehab

Though Belfort went to rehab of his own volition, the involuntary psychiatric hold he started under was, by definition, against his will. Someone can be placed on a psychiatric hold if the police or a mental health provider determines that they pose a danger to themselves or others. The rules on being released from a psychiatric hold vary from state to state. In Florida, where Belfort was hospitalized, an involuntary hold may only last for 72 hours unless extended by a judge. However, during that time, the hospital conducts a psychiatric exam, which is used as a basis for the court to decide whether a person should remain under care.

While Belfort describes his experience in rehab as generally positive, if annoying at times, that hasn’t been the case for everyone. In her memoir The Woman in Me, pop star Britney Spears recounts an extremely traumatic rehab experience during which she had no privacy or autonomy, doctors physically examined her daily, and she was medicated without her consent. Though Spears was certainly more famous than Belfort, his financial worth was higher than hers, and he still had control of his fortune whereas Spears did not, which may account for the stark difference in their treatment.

Nevertheless, Belfort recalls that those first sober months were the clearest, happiest, and healthiest he’d had in over 10 years. He worked on trying to repair his marriage, spend time with his children, and explore his new reality. Many of his old friends drifted away, and his relationships with the ones who stayed changed. Stratton Oakmont had long since closed down, and Belfort’s other financial streams folded. He didn’t care—he was sober, rich, and happy—until September 1998, when the FBI arrested him for money laundering and fraud, shortly after which, Nadine filed for divorce.

(Shortform note: Belfort ends his memoir on a cliffhanger—his arrest by the FBI—without delving into their case against him or the path that led to his eventual conviction. Those details are in his follow-up memoir, Catching the Wolf of Wall Street, published in 2011. In prison, Belfort served time with famed comedian Tommy Chong, who’d been convicted of selling drug paraphernalia. According to Belfort, it was Chong who inspired him to write his memoir, which was bought by Random House before it was finished, with a deal for Martin Scorsese’s film adaptation also in the works. Upon his release in 2006, Belfort once again landed on his feet.)