Christopher DeVocht, a carpenter from Vancouver Island, says he started out like many day traders, reading about the best Canadian stocks on forums after work. His focus was on Tesla Inc. stock options, which led to what he claims was one of the most remarkable hot streaks in financial market history. According to a legal filing, DeVocht’s brokerage account with Royal Bank of Canada’s division grew from $88,000 at the end of 2019 to an astounding $415 million within just two years.
However, DeVocht didn’t cash out at the peak. When Tesla stock tumbled in 2022, he reportedly lost everything.
This week, he filed a lawsuit against RBC Dominion Securities, RBC Wealth Management, and accounting firm Grant Thornton LLP, alleging that their advice contributed to his financial downfall. The initial notice of claim, which at this stage doesn’t require evidence, lacks brokerage statements or other proof of his claimed gains and losses.
RBC Advised DeVocht To Hold Options To Avoid Tax Implications
At the heart of DeVocht’s complaint is the assertion that the advice he received, primarily focused on tax minimization, was negligent and failed to consider his limited financial sophistication outside of Tesla trading. “RBC considered Mr. DeVocht to be a sophisticated investor,” the complaint states. “While this was true in respect of his strategies for put and call options in the trading of Tesla shares, RBC failed to appreciate that Mr. DeVocht’s knowledge of investing more generally, of financial planning, and of tax was in fact limited.”
The lawsuit paints a picture of a young trader in his 20s, grappling with “significant respiratory and other health issues,” who sought financial guidance as his wealth rapidly increased. In July 2020, when DeVocht first approached Royal Bank for a home loan, his portfolio was reportedly worth about $26 million “and rising rapidly.” He was subsequently connected with a team of professionals who advised him to incorporate a company, transfer all his securities into it, and “conduct trades within the company with a strategy of accumulating as many Tesla shares as possible and holding them for as long as possible.”
This strategy, aimed at convincing Canadian tax authorities to view his operations as an investment holding company rather than an active trading business for tax purposes, led to what DeVocht claims was an “extreme concentration in Tesla” with corresponding risks. While this approach initially paid off spectacularly – his portfolios allegedly surged from $186 million to $415 million in about eight months in 2021 – it ultimately resulted in a catastrophic loss when Tesla’s stock price declined.
As Tesla shares suffered a series of declines throughout 2022, DeVocht attempted to recoup some of his losses by borrowing $20 million from his corporation for shorter-term personal trades. This strategy failed, resulting in further losses. The final blow came in October 2022 when steeper declines in Tesla’s stock price forced DeVocht’s corporation to liquidate its Tesla holdings to repay loans from a margin account held with Royal Bank.
Royal Bank Has Yet To Comment Or File A Defense
As of now, Royal Bank, one of the top Canadian bank stocks, has not commented on the case or filed a defense. Grant Thornton stated that they don’t comment on matters before the court but emphasized their commitment to “providing quality services to all our clients in accordance with professional standards.” The case, filed with the Supreme Court of British Columbia in Vancouver, is still in its initial stages, and the veracity of DeVocht’s claims remains to be tested in court.
Note: Options trading carries significant risks that can lead to substantial financial losses. Unlike traditional stock trading, options allow investors to control large amounts of assets with relatively small investments, amplifying both potential gains and losses. This leverage can result in rapid and severe depletion of capital if the market moves against the trader’s position. Additionally, options have expiration dates, meaning traders can lose their entire investment if their predictions about price movements or timing are incorrect. The complexity of options strategies also increases the likelihood of errors in execution or misunderstanding of risk exposure.
