Chapman, Albin: OptionSellers Investors File $7 Million Lawsuit Against FCStone For Massive Losses
CLEVELAND and DETROIT and TAMPA, Fla., Dec. 4, 2018 /PRNewswire/ -- Twelve Michigan families who suffered catastrophic losses in a botched investment deal, filed loss recovery claims on Monday against Intl FCStone, a New York-based financial services company. According to the investors' claims, FCStone was asleep at the switch when OptionSellers poured tens of millions of dollars of customer assets into a high risk bet that natural gas prices would not rise. Instead, they spiked, and the Michigan investors lost everything, and more. For example, one Michigan family lost more than a half-million dollars in their IRA—money they had set aside for retirement. Then FCStone demanded the family pay an additional $250,000 because the high risk bet on natural gas prices had gone so wrong that investors' losses exceeded the assets in their accounts.
"All the investors were promised safeguards would be in place in place to protect their savings from large losses," said Jason Albin one of the attorneys for the investors. "They were blind-sided by the news that their savings were wiped out, and then crushed by FCStone's margin call." Instead of having safeguards in place to protect investors, OptionSellers took huge naked options positions in natural gas and crude oil, which subjected FCStone customers to unlimited downside risk that exceeded the value of their accounts. "It's worse than betting the farm," commented Albin, "it's like taking out a huge mortgage on the farm, then betting the farm and all the money you just borrowed against it, and losing it all, in one day of trading."
The statement of claim alleges the 12 Michigan investors lost over $7 million. Mr. Albin says, "most of the investors we represent had disclosed risk tolerances of 'conservative' or 'moderate,' but the trading in these accounts was pure speculation." The statement of claim alleges OptionSellers' trading strategy normally included some risk protection and hedging to protect against catastrophic losses. It further alleges that in the days, weeks, and months leading up to November 14, those risk prevention and hedging strategies were almost completely abandoned subjecting FCStone customer accounts to unlimited downside risk including the margin blowout.
The Michigan filing is the first in a series of cases that his law firm, Chapman, Albin, is preparing to file on behalf of about 85 investors. Mr. Albin says, "investors have been calling daily since OptionSellers blew up their accounts." He added "the losses have left many devastated and terrified of the consequences of not meeting FCStone's margin calls."
SOURCE Chapman, Albin
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