Wolf of Wall Street subject Jordan Belfort has weighed in on the current stock market chaos happening, and he offered some advice to the Reddit investors who’ve been driving the stock prices up. Speaking to TMZ, Belfort said that the amateur investors should back “good” stocks over flailing ones like Gamestop and AMC. He clarified that he has absolutely no problem with what the WallStreetBets Redditors are doing — as essentially the entire plot of Wolf of Wall Street was to show the true story of how he basically did the same thing, just on a larger scale — but he wants them to be safe about it as the legalities of all this are a bit unclear.
Essentially, in very basic terms, what happened is that a mass group of followers on the sub-Reddit all bought Gamestop stock when they noticed that a specific hedge fund was attempting to do a short-sale on it. This drove the price up, making the cost too high for the fund to repurchase the stocks, resulting in bankruptcy. However, the controversy does not stop there, as Robinhood — an app-based stock trading company — is now in hot water for choosing to halt all user-based trading, while the hedge funds and Wall Street companies are still allowed to.
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Belfort commented on this as well, saying that he gets why it’s upsetting to people, but he also understands where Robinhood and other amateur-friendly trading companies are coming from. In his expert opinion, these companies are just trying to protect themselves from any possible future liability. It’s not the big trading companies and hedge funds they’re probably worried about, though, as Belfort says he thinks they’re are worried about the Reddit-based investors losing all their money and then wanting to sue.
Notably, Robinhood is already being sued, with attorney Alexander G. Cabeceiras announcing on Thursday that he has brought a class-action lawsuit against the company. In legal filings, Cabeceiras accuses Robinhood of “purposefully, willfully, and knowingly removing the stock ‘GME’ from its trading platform in the midst of an unprecedented stock rise, thereby deprived [sic] retail investors of the ability to invest in the open-market and manipulating the open-market.”
More lawsuits could be on the way as well, with attorney Philip Vujanov from law firm ChapmanAlbin stating that his firm was “investigating claims on behalf of Robinhood users that were affected and suffered losses as a result of investing in Gamestop or AMC.” Vujanov added, “Robinhood appears to be up to the same old tricks, recruiting social media influencers to encourage individuals to sign up and fund a Robinhood account and beginning purchasing shares of securities such as Gamestop and AMC, with no consideration as to the suitability of the purchases.”
