Jordan Belfort has a warning for those looking to cash in on the Reddit-fueled stock surges.
The infamous ex-stockbroker, who was the inspiration behind Martin Scorsese's Wolf of Wall Street film, recently spoke to CNN about the GameStop mania sweeping Wall Street. He acknowledged that small-time investors can make a lot of money through red-hot stocks, but reminds them they can also easily lose it.
"It's truly a modified pump and dump because, at the end of the day, it will most certainly go back down because it's not trading on any rational, fundamental value," Belfort said. "Just remember, every time the market goes up, GameStop goes up, it's going to be harder and harder to make that next move up because the market cap is just not sustainable. So, at a certain point, someone has to be crossing out the people who are selling and moving on to the next one."
Belfort, who was convicted of defrauding over 1,500 investors in the '90s, also spoke about the legality of the coordinated rallies behind companies like GameStop and AMC, which have become popular among short-sellers. He echoed other experts who say it would be extremely difficult to prove that these Reddit users had committed any crimes by pumping these companies.
"If you could prove that they are actually colluding together, then that would be illegal," he said. "The problem is it is sort of this loose collision where one person says 'Let's stick together and stay strong.' And theoretically, that's illegal. But I doubt that the [U.S. Securities and Exchange Commission] would try to make a case out of something like that."
In a separate interview with TMZ, Belfort insisted he was rooting for the "little guy" who have increased the price of GameStop shares, and effectively screwed over short-sellers who were betting on the company's failure. However, he said he would like to see these amateur investors put their money toward winning companies instead.
"Why not do the same thing with good stocks? Why find a shit stock and pump it up? You can do the same exact thing with a great undervalued [company]," he said. "Why find the crappy stock that's destined to eventually fall back down to earth?"