(Bloomberg) – Christopher DeVogt, a carpenter on Canada’s Vancouver Island, says he started out like many day traders. After work, he would read about trading on forums. His favorite trade was options on Tesla Inc. (TSLA) stock.
Most Read Articles on Bloomberg
He then went on to do what must be one of the hottest events in the history of financial markets, according to legal filings. At the end of 2019, his account with Royal Bank of Canada’s securities division was worth C$88,000. Within two years, he says, he turned that into C$415 million ($306 million).
Some people may have turned it into cash. Mr. DeVocht did not. And when Tesla stock fell in 2022, he lost everything, according to a lawsuit he filed this week against RBC Dominion Securities, RBC Wealth Management and accounting firm Grant Thornton LLP. This application was the first notice of claim that did not require the submission of evidence at this stage and did not include brokerage statements or other evidence of profits and losses.
Mr DeFork now claims that the advice he received was primarily aimed at minimizing tax and was negligent in failing to take into account his level of financial knowledge. His Tesla investment strategy included financing from a Royal Bank margin account.
“RBC considered Mr. DeVoto to be a sophisticated investor,” according to the complaint. “While this was true regarding put and call option strategies in Tesla stock trading, RBC recognized that Mr. DeFolk’s knowledge of investments, financial planning, and taxes more generally was actually limited. I couldn’t.”
Royal Bank had no immediate comment Friday and has not yet filed a defense in the case. Mr. DeVoct’s attorney, Sean Hahn, declined to comment beyond the complaint. Grant Thornton said he would not comment on matters before the court.
“The only statement we can make at this time is that we are committed to providing quality service to all of our customers in accordance with professional standards,” Grant Thornton said in an emailed statement. Ta.
In his lawsuit, DeVocht said he was good at trading Tesla stock and options, but in his 20s and suffering from “respiratory illnesses and other significant health issues,” he had a limited understanding of financial issues. He said that he had done so. When he first visited Royal Bank in July 2020, he wanted a loan to move out of his rented apartment and buy a house. At the time, his portfolio was worth about C$26 million and “rapidly rising,” according to a civil claim notice filed in British Columbia Supreme Court in Vancouver.
story continues
He was soon introduced to a “coach and coordinator” within the bank, who connected him with accountants at Grant Thornton, according to the complaint.
The assembled team of experts advised them to form a company, put all their securities into it, and trade within the company “with a strategy of accumulating as many Tesla shares as possible and holding them for as long as possible,” DeVott said. he claims. Lawsuit.
The idea, according to the complaint, was to persuade Canadian tax authorities to consider the company an investment holding company rather than an active trading operation. This is because the taxes you pay will be lower.
This led to “hyper-concentration on Tesla,” DeVogt argues, with associated risks. As stocks soared in 2021, his portfolio soared from C$186 million to C$415 million in about eight months that year, according to the lawsuit, before collapsing. .
“It’s worth nothing.”
Tesla stock suffered a series of declines and periodic gains throughout 2022, and DeFolk sought to recoup some of his losses by borrowing C$20 million from the company and making short-term trades in his personal account. That strategy failed and the funds were lost, he said in the complaint. When Tesla stock plunged even further in October 2022, DeFolk’s company had to sell Tesla stock to repay a loan from a credit account it held with Royal Bank, according to the complaint. .
Mr. DeFolk and his company tried to mitigate these losses, but over time “their securities became worthless,” the complaint said. Without the “poor advice” Mr. DeVoto received, he and his company “would have executed a financial plan that would have preserved a significant portion of their wealth and not resulted in the loss of their entire net worth.”
Mr. DeVocht and his company are seeking general damages for breach of contract and negligence. His claims also allege that Royal Bank’s recommendation that he give away C$25.5 million in charitable donations further eroded a significant portion of his wealth.
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP
