Jordan Belfort founded Stratton Oakmont in 1989 with
Danny Porush. Earlier, Belfort had opened a franchise of Stratton Securities, a minor league
broker-dealer, and then bought out the entire firm. Stratton Oakmont became the largest
over-the-counter firm in the
United States during the late 1980s and 1990s, responsible for the
initial public offering of 35 companies, including
Steve Madden, Ltd. The firm had no
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 (often under $250-$300 million market cap in today's standards) that involves artificially inflating the price of an owned
stock through false and misleading positive statements 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 also tried to maintain stock prices by refusing to accept or process orders to sell stock. In 1995, the firm sued
Prodigy Services Co. for
libel in a New York court, in
a case that had wide legal implications. The firm was under near-constant scrutiny from the
National Association of Securities Dealers (NASD) from 1989 onward. Finally, in April 1996, the New York District Business Conduct Committee barred Stratton Oakmont from conducting principal retail transactions for a year. Stratton Oakmont appealed to the NASD National Business Conduct Committee. In December, the NBCC expelled Stratton Oakmont from the NASD, putting the firm out of business. Officials called Stratton Oakmont "one of the worst actors" in the securities industry, with a history of "obvious disregard for all rules of fair practice". In 1999, Belfort and Porush were indicted for
securities fraud and
money laundering. They pleaded guilty and admitted 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==