Day Trader Says He Made $306 Million With Tesla, Then Lost It All

(Bloomberg) — Christopher DeVocht, a carpenter from Vancouver Island, Canada, says he started out like many day traders. After work, he read about trading on forums. His favorite things to trade were Tesla Inc stock options.

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Then followed what has to be one of the most heated exchanges in the history of financial markets, according to a legal filing. At the end of 2019, his account at Royal Bank of Canada’s brokerage division was worth $88,000. In two years, he turned that into $US415 million ($306 million), he says.

Some people would be cashed. DeVocht did not. And when Tesla’s stock tanked in 2022, he lost everything, according to a lawsuit he filed this week against RBC Dominion Securities, RBC Wealth Management and accounting firm Grant Thornton LLP. The filing, which is an initial notice of claim that does not require evidence to be provided at this stage, did not include brokerage statements or other evidence of its earnings or losses.

DeVocht now alleges that the advice he received, primarily aimed at reducing taxes, was sloppy and did not take into account his level of financial sophistication. His Tesla investment strategy involved borrowing from a Royal Bank margin account.

“RBC considered Mr. DeVocht to be a sophisticated investor,” according to the complaint. “While this was true of his put and call strategies in Tesla stock trading, RBC failed to understand that Mr. DeVocht’s knowledge of investing in general, financial planning, and taxes was actually limited .”

Royal Bank had no immediate comment on Friday and has not yet filed a defense in the case. DeVocht’s attorney, Sean Hern, declined to comment beyond the complaint. Grant Thornton said it does not comment on matters before the court.

“The only statement we can provide at this time is that we are committed to providing quality service to all our clients in accordance with professional standards,” Grant Thornton said in an emailed statement.

DeVocht was good at trading Tesla stock and options, he said in the lawsuit, but he was in his late 20s, struggling with “respiratory problems and other significant health issues” and had limited understanding of financial matters. When he first went to Royal Bank in July 2020, he wanted a loan so he could move out of his rented flat and buy a house. At the time, his portfolio was worth about C$26 million “and growing rapidly,” according to the notice of civil claim filed in British Columbia Supreme Court in Vancouver.

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He was soon referred to a “coach and coordinator” at the bank, who then connected him with an accountant at Grant Thornton, according to the complaint.

The team of professionals advised him to incorporate a company, put all of his stock into it and trade within the company “with a strategy to accumulate as much Tesla stock as possible and hold it for as long as possible.” DeVocht claims in the lawsuit.

The idea was to get Canadian tax authorities to see it as an investment holding company, not an active trading business, because it would pay lower taxes that way, according to the complaint.

This led to an “extreme concentration in Tesla” that came with corresponding risks, DeVocht argues. When the stock rallied in 2021, it paid off — its holdings rose to $415 million from $186 million in about eight months that year, according to the suit — before collapsing.

“It’s worth nothing”

Tesla’s stock has suffered a series of periodic highs and lows throughout 2022, and DeVocht has tried to recoup some of the losses by borrowing C$20 million from the corporation and using it to make shorter-term trades in his personal account. The strategy failed and the money was lost, he said in the complaint. When Tesla’s stock fell even more sharply in October 2022, DeVocht’s corporation was forced to sell its Tesla holdings to repay loans from a margin account it held at Royal Bank, according to the suit.

DeVocht and his corporation tried to mitigate those losses, but over time, “their security holdings were worth nothing,” he said in the complaint. If not for the “inadequate advice” received by DeVocht, he and his corporation “would have retained a substantial portion of their wealth and implemented financial planning that would not have resulted in the loss of their entire net worth.”

DeVocht and his corporation seek general damages for breach of contract and negligence. His claim also claims that Royal Bank’s recommendations to make charitable donations of $25.5 million further eroded a significant portion of his wealth.

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