Fraud, Ponzi Schemes, and Investors' Right to Recover for Financial Loss

• Author: Anita Indira Anand
• Pages: 60-71

60

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Fraud, Ponzi Schemes, and Investors’

Right to Recover for Financial Loss

Whenever an investor invests money in the capital markets, the

investor runs the risk of getting ripped o.

The Dark Side of Financial Advising

The Wolf of Wall Street portrays capital market activity at its worst.

The movie depicted the life of infamous stockbroker and convicted

fraudster Jordan Belfort. Belfort, played by Leonardo DiCaprio, is a

born salesman, as charismatic as he is unscrupulous. In one scene,

we see him at work selling penny stocks at a staggering 50 percent

commission rate. Belfort gets a client on the phone and, knowing

almost nothing about the company he describes in glowing terms,

explains, “I never ask my clients to judge me on my winners,” he

tells the unsuspecting investor on the other end of the phone, “I

ask them to judge me on my losers because I have so few. And in the

case of Aerotyne, based on every technical factor out there, John,

we are looking at a grand slam homerun.”  Seduced by this pitch,

John goes in for 40,000 shares at $4,000, and Belfort hangs up the

phone having made a $2,000 commission. Meanwhile, Aerotyne

1 The Wolf of Wall Street (2013; Los Angeles: Paramount Pictures Corp, 2014), DVD.