The first of what could be many lawsuits has been filed in connection with an options trading fiasco in which a Tampa company lost at least $150 million of its clients' money.
Attorney Jason Albin is suing the brokerage firm INTL FCStone on behalf of 10 Florida families, alleging that it failed to have adequate procedures in place to detect and protect against the kind of losses incurred.
FCStone, a public company with almost $30 billion in revenues last year, handled trades that James Cordier of Tampa-based OptionSellers.com made for nearly 300 investors including Tampa Bay Lighting owner Jeff Vinik. In a bizarre video posted on YouTube on Nov. 16, Cordier apologized to clients for losing their money in what he called an "incredibly devastating'' turn of events.
According to the complaint filed Friday, Cordier — who wrote a popular book on options and has been quoted in the Wall Street Journal and other news media — recruited investors to open accounts at FCStone by promising "high returns and fastidious risk management.'' Instead, the complaint says, the brokerage ignored risks in order to appease Cordier's company, which was generating large commissions for FCStone.
During the week of Nov. 12, FCStone "turned a blind eye as its account holders' assets became increasingly concentrated in highly volatile natural gas and crude oil options positions,'' the complaint says. "OptionSellers.com was betting prices would remain stable or that natural gas prices would drop and crude oil prices would rise. If they had, OptionSellers.com would have made a small profit on the options contracts.''
On Nov. 14, however, natural gas prices spiked and crude oil prices dropped, causing losses to investors that exceeded the amounts in their brokerage accounts. "FCStone was allowing OptionSellers.com to take extraordinary risks for a very small return,'' the complaint says.
On Nov. 15, Corider notified clients of their losses in an email title "Catastrophic Loss Event.'' On the same day, FCStone emailed clients that their margin debt payments — money borrowed from the brokerage to make trades — were due by the end of the day.
Albin has not identified the clients he represents but said a 79-year-old investor in Fort Myers lost $1.8 million and owes FCStone $571,000. Another investor, from the Tampa area, lost $450,000 and owes $125,000,
"None of the investors realized they could wake up one day to discover that they had not only lost all the money in their accounts but also owe money to FCStone,'' Albin said. "The saddest part about this whole mess is that it could have been avoided if FCStone had just done its job.''
The families are seeking $9.5 million from FCStone since Cordier's company apparently has no assets. He has not returned calls for comment, and FCStone did not return a call or email.
Albin, a partner in the Ohio law ChapmanAlbin, filed his complaint with the Financial Industry Regulatory Authority, a non-government, not-for-profit organization authorized by Congress to protect investors by writing and enforcing rules governing the activities of broker-dealers. Several other law firms are also offering to help OptionsSellers clients recoup their money.
Contact Susan Taylor Martin at email@example.com or (727) 893-8642. Follow @susanskate.