Jordan Belfort, the stock fraudster played by Leonardo DiCaprio in Martin Scorsese’s dazzling movie, “The Wolf of Wall Street,” left behind a money trail that eventually led to his downfall, according to investigators who spoke at the Association of Certified Fraud Examiners annual fraud conference.
The audience at the conference, which has been taking place in San Antonio, Texas, this week, heard from a former federal prosecutor and a current FBI agent about how they helped bring Belfort to justice.
[IMGCAP(1)]FBI special agent Gregory Coleman described how Belfort made his firm, Stratton Oakmont, appear more legitimate than the average pump-and-dump boiler room operation by creating marketing materials touting it as a top finance firm, according to an account on the ACFE’s fraud conference site. He also touted the firm as a competitor to more reputable Wall Street firms and spent heavily on flashy clothes and parties.
Belfort recruited friends from high school and college who had little experience in the securities industry and trained them on how to use his persuasive sales techniques. However, Belfort’s free-spending lifestyle and dubious claims for his firm’s investment returns eventually caught the attention of securities regulators and the FBI, as he boasted of returns averaging 75 percent one year and nearly 90 percent the following year.
“Jordan Belfort was a dangerously smart criminal,” Coleman told fraud examiners in the audience. “His own employees thought the business was legitimate for up to a year in some cases because of how well he marketed the company.”
After six years of investigating Belfort, Coleman teamed up with Joel M. Cohen, who began working as Assistant U.S. Attorney in the Eastern District of New York in 1997. He is currently a partner at the law firm Gibson, Dunn & Crutcher.
[IMGCAP(2)]“Much of the investigation into Belfort up to that point was in Greg’s head,” Cohen told the ACFE audience. “He knew everything about him and what he was up to. My predecessor left me one box of some files, but Greg came in my office and rolled out a 14-foot-long roll of paper that showed a long flowchart of funds.”
The document showed how the Securities and Exchange Commission had tried to shut down Belfort’s schemes, yet Belfort had nevertheless continued his fraudulent stock sales through brokers who had left other firms that had been closed, a practice known as “cockroaching.”
Belfort hid much of the illicit proceeds in a Swiss bank, but Cohen and Coleman had difficulty convincing the Swiss authorities to recognize Belfort’s securities fraud as a crime. Eventually with documents they were able to procure from Switzerland, along with surveillance recordings, they were able to extract a confession out of Belfort. He was sentenced to four years in prison, but only served 22 months.
Coleman and Cohen criticized the movie for glorifying Belfort’s exploits and plugging his motivational speaking business, while minimizing the damage that his swindles caused to investors who lost their savings on his scams.
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