Tesla Day Trader Loses Entire $306M Fortune, Sues Canadian Bank For 'Misleading' Financial Advice

Carpenter Christopher DeVocht from the Sooke community of British Columbia, Canada, is among the few day traders who have grown thousands of dollars to hundreds of millions in a short span and then lost it all. DeVocht started as most traders do, following trading forums and backtesting strategies, but little did he know his C$88,000 ($64,760) in late 2019 would grow to $306 million in two years. DeVocht loved trading Tesla Inc. stock options, and despite timing the market correctly, which resulted in monumental returns, he didn't cash out. Soon after, he was compelled to sell all holdings to repay loans from his brokerage margin account. DeVocht's massive losses led him to file a lawsuit with the Supreme Court of British Columbia in Vancouver.

RBC Viewed DeVocht As a "Sophisticated" Trader

According to the legal filing, RBC Dominion Securities., RBC Wealth Management Financial Services, and Grant Thornton violated contracts by offering "inadequate advice" that cost DeVocht his entire wealth. The lawsuit alleged that RBC considered DeVocht a sophisticated trader, given his options trading win rate. However, RBC didn't acknowledge that his "knowledge of investing more generally, of financial planning, and of tax was in fact limited." The filing highlighted DeVocht was a small, part-time trader with mostly Tesla stocks and derivatives at the end of 2019. Eventually, he invested all his savings and gains as his portfolio value surged in months. He had amassed C$5.5 million by early 2020 at the age of 30, and by June, his portfolio was worth C$26 million.

RBC Advisers Overlooked Devocht's Plans To Retire

Apart from claiming "significant respiratory" health issues and a limited understanding of financial complexities, DeVocht also stressed how he approached RBC for a loan in 2020 to move out of a rental apartment and buy a home. His enquiry at RBC Private Banking on securing a loan against his equity holdings translated to an agreement between DeVocht and RBC for financial advisory services. An accountant at Grant Thornton also helped him navigate financial tax planning. However, the complaint noted that RBC advisers didn't understand or encourage DeVocht's desire to "essentially retire" by offloading Tesla options to invest in secure instruments for passive income.

In contrast, the advisers recommended that he establish a company and roll his securities into it. They asked him to execute trades within the newly formed company and hold as much Tesla stock as possible. This strategy would have supposedly helped DeVocht avoid high taxes by convincing the Canadian tax authorities that the legal entity is an investment holding company and isn't engaged in active trading. Furthermore, the lawsuit claims DeVocht was also advised to donate to the RBC Charitable Gift Fund for charitable tax credits, giving over $8 million in late 2020 and $17 million a year later.

Portfolio Collapses After More Than Doubling In Eight Months

RBC offered a margin account that allowed DeVocht to borrow money for trading. He used it and grew his portfolio to C$186 million by April 2021. Within eight months, it doubled to over C$415 million. However, investing in securities within the company designed to trade the Tesla stock primarily led to "extreme concentration." In 2022, Tesla shares experienced massive fluctuations and declines that compelled DeVocht's holding company to offload shares to repay outstanding RBC margin account loans. "In time, the plaintiffs' security holdings were worth nothing," according to the claim. "But for the defendants' inadequate advice...the plaintiffs would have preserved a substantial portion of their wealth and implemented financial planning that would not have resulted in the loss of their entire net worth."

Although DeVocht attempted to recoup losses by borrowing another C$20 million from the corporation to make short-term trades, the approach didn't work. Despite multiple efforts, securities held within the holding company "were worth nothing." The complaint also raised concerns about how RBC's suggestion to make over C$25 million in charitable donations significantly depleted much of his wealth. While DeVocht seeks compensation for general damages due to contract breaches and negligence of duties, none of the allegations have been proven in court yet.