How to Sue a Clearing Broker
[Ed. Note: This post has been updated several times, most recently in January 2021. The original post below is from our friends at Chapman Albin in Cleveland. We have worked for many years with both John Chapman and Jason Albin. At their request, we are posting an urgent call for victims of the OptionsSellers.com scam. We have previously teamed up with John and Jason to help collect millions of dollars from unscrupulous stockbrokers, investment advisers and others in the financial services industry.
While the beginning of this post concerns a company called OptionSellers.com, the bigger story is about investors wondering what to do if their brokerage firm has gone under. We address that question at the end of the post. Even if you are not a customer of OptionsSellers.com, reading about how that company went under and what is being done to help investors serves as a great background.]
OptionSellers.com Fraud Alert!
The investor recovery lawyers at ChapmanAlbin are investigating and preparing to file claims against OptionSellers.com and the company’s clearing broker INTL FCStone. If you lost money due to OptionSellers.com’s reckless options trading strategy, contact us today at 1-877-410-8172. You can also email attorney Jason Albin at . Consultations are confidential, without obligation and free.
OptionsSellers Loses Millions of Investor Monies
This week, OptionSellers.com notified its clients by email of an event they call a “Catastrophic Loss Event.” In the email, OptionSellers say that not only did they lose all of their customers’ money, they also say those customers now owe money to Intl FC Stone for margin calls. INTL FCStone is a multi-billion financial services company that acted as the clearing house for OptionSellers.
According to the email, OptionSellers lost a substantial portion of their customers’ money due to a short call position in crude oil that, according to them “was so fast and intense that it overwhelmed all risk measures in place.”
Not only did investors lose all their money, the company says customers now have a debit balance in their accounts meaning they must write checks to INTL FC Stone to bring their accounts current. the difference.
Cases where a broker loses all of a customer’s money are thankfully rare. This case is truly unique, however. Investors have not only lost their entire investment, they now find themselves facing possible collection action for the money they owe for margin calls.
Claims against OptionSellers.com and Its Principals
Tampa-based OptionsSellers.com touts itself as premier and highly experienced commodities options trading firm. The firm’s president and head trader, James Cordier, explained in a recent interview: “Our goal is to take an aggressive vehicle and manage it conservatively.”
Conservatively? How can a firm trade “naked” options instead of covered options and claim they are acting conservatively? They can’t.
Since the email was sent on November 15th, OptionSellers.com website has gone mostly dark. Except for the home page, information about their trading strategy, blog posts and guide as to how to trade options have been removed. Even the link to founder James Cordier’s book, the Complete Guide to Option Selling has been deactivated.
None of this is a good sign for investors. We worry about their ability to pay the millions of dollars of customers claims.
Because the company traded naked options, it apparently managed to quickly lose everyone’s money. In our opinion, OptionSellers.com’s trading strategy was extremely risky and unsuitable for its clients and breached its fiduciary duties to them. The company put its interests ahead of those of their clients.
The Optionsellers.com team includes Rosemary Veasey, Matthew Donovan, James Cordier, Michael Gross, and Alicia Zedella.
If OptionSellers.com Is Out of Business, How Can I Get Back My Money?
Claims against Intl FCStone
We believe that INTL FC Stone, the firm that executed the trades for OptionSellers.com, may be liable for investor losses. INTL FCStone is a large publicly-traded company that has billions of dollars of annual revenue. It may not be a household name but it certainly has deep pockets and we believe it is also at fault.
We believe INTL FC Stone failed to conduct proper due diligence of OptionSellers.com’s traders. Principals James Cordier and Michael Gross had multiple complaints filed against them in the past, certainly something that should have raised a red flag.
We also believe FCStone failed to know its customers, and thus allowed Optionsellers.com to trade options in IRA accounts on margin, something that is normally forbidden.
Call Today for a Free Consultation to Explain Your Rights against INTL FC Stone and OptionSellers.com
Since 1998, the attorneys at ChapmanAlbin have helped hundreds of investors recover millions of dollars lost due to investment fraud and negligence. Call us today at 1-877-410-8172 or email attorney Jason Albin at to discuss your options against OptionSellers.com and INTL FC Stone. Cases handled throughout the United States.
MAHANY LAW UPDATE: Since we wrote our post, OptionSellers founder James Cordier posted a tearful apology video. Our comments follow the video.
The following comments are those of Brian Mahany, principal of MahanyLaw and not those of Chapman Albin.
By Brian Mahany: We assume that Cordier’s apology is sincere. There is no evidence that he stole the money. But that doesn’t make his actions and those of his company any easier to swallow.
Some folks had their entire retirement savings wiped out. Decades of work and the hopes of a happy retirement wiped out in minutes by what Cordier calls a “rogue wave.” There was nothing rogue about the wave… when he advertised 28% returns, the only way to deliver was to take some incredibly risk positions. Sooner or late, lady luck runs out.
If there could be anything worse than losing one’s entire life savings, it is also being on the hook to a clearing broker for tens of thousands of dollars more. That’s right, optionsellers clients not only lost their money, they now owe money in the form of margin calls. Only once we have another such devastating scheme (Carlton Cabot).
Within 24 hours of the original post, we heard one from one reader who wrote, “Cry me a river, b*tch.” Someone on social media pointed out that Cordier was still waring a Rolex in his video. The anger and hurt is raw and unimaginable. Yet we have to imagine and figure out a way to deal with the problem.
Let’s break this tragedy into pieces so we can better focus and look at customer’s options. Despite Cordier likely being bankrupt, there are still ways for investors to be made whole.
Was OptionSellers a Scam or Ponzi Scheme?
This tragedy is less than a week old but the initial evidence doesn’t suggest a scam in the sense that Cordier ran off with investor funds. If there is such a thing as a “traditional” fraudster, he or she usually runs away and hides or they makes up excuses in the hopes of buying time. The latter is especially infuriating since many victims desperately want to believe this is all a bad dream and that somehow the bad guy will find their money. With each day delayed, recovery becomes more difficult.
Lets be clear, there isn’t a pot of gold at the end of the rainbow in this case, at least not for optionsellers and Cordier. Investors? Maybe, more on that below.
While we don’t think Cordier stole investor’s money, we still think his options trading strategy was a scam. You cannot use the words “conservative” and 28% returns in the same paragraph. If it was that easy, everybody would be making huge returns. From those we have spoken with, optionsellers was downplaying the huge risks of naked options. Investors were lulled into a false sense of security.
In a 2019 Tampa Bay Times story (Cordier set up his headquarters in Tampa), Cordier was quoted from an earlier interview, “The best way to invest for my clients without emotion is not to have skin in the game. I do extremely well investing for 300 people.” Apparently, he never had his own money at risk. Just yours and mine.
To earn 28%, Cordier required his clients to leverage their position through margin, itself a risky play. Leverage is a double edged sword. If you are selling naked options, the risks are huge. It’s nice to earn 7% profits every 90 days but a single rogue wave becomes a potential death warrant.
If OptionSellers Is Out of Business, How Do I Get Back my Money?
Investors really have two problems, getting out of the money they owe to the clearing broker and getting back their losses. INTL FC Stone is at the center of both those issues.
We will assume that Cordier and optionsellers have nothing left. The only deep pocket, then, becomes the clearing broker. Going after clearing brokers isn’t easy. Google Wells Fargo and “fraud” and you will find lots of lawyers lining up at the trough. Not in this case, the only deep pocket is INTL FCStone and in most cases, they had no direct interaction with optionsellers’ customers.
How to Sue a Clearing Broker
(What to Do When Your Brokerage Firm Is Out of Business)
Suing a clearing broker is never easy. But it can be done with experienced lawyers and the right lawyers.
We often see several small brokerage firms go under each time a big Ponzi scheme comes to light. When both your broker and brokerage firm go broke, sometimes the only deep pocket is the clearing firm.
There are two types of brokerage firms that service retail clients. First, there are the larger brokerage firms that are able to process their clients’ own trades (firms that “self-clear”). Think Merrill Lynch.
The second group are the smaller independent brokerage firms. These firms use a “clearing broker” to execute and process their clients’ trades. Clearing brokers act as the back office but do not have any direct contact with the customers.
Typically as long as clearing brokers properly execute trades, they are not responsible for the wrongdoing of the brokerage firms that hire them. There are exceptions, however.
One exception is when clearing brokers aid and abet the bad contact of the introducing brokerage firm. Another example is when the clearing broker turns a blind eye to obvious signs of fraud.
We believe there were plenty of red flags about Cordier and his prior business dealings. INTL FC Stone should have seen these flags. This is no different than the banks that launder money for the cartels or terrorists groups. You can’t just close your eyes about the activities of your customers. In this case, INTL FCStone’s customer was optionsellers.
If that sounds too general for you, INTL FC Stone should have seen that many customers were putting their IRA monies into Cordier’s platform. And that is almost always a no-no.
Will investors get back all of their money? The cases against INTL FCStone are not easy. The only way to collect 100 pennies on the dollar is to try the case to conclusion and win. Something both we and Chapman Albin are willing to do. Absent a trial victory, however, investors should not expect a full recovery.
Want to see if you have a case? If it involves optionsellers.com, contact our friends at Chapman Albin or get in touch with us directly. If the case involves a different brokerage firm, contact us directly. We can be reached online, by email or by phone at 202-800-9791. We are happy to discuss other cases in which the losses are $100,000 or more. (Sometimes in smaller cases we can aggregate claims making representation more cost effective. All cases taken on a contingent fee basis meaning no fee unless we recover money for you.)