Optionsellers.com goes bust and the apology video is painful to watch

[JSOP]

The latest....

OptionSellers.com Memo to Clients November 19, 2018

1. Will there be some type of fee credit to my account?
While this was our original intention, the debit situation with FC Stone has taken this option off the table. The figure on your account statement today is the FINAL figure for a debit call.

So is the fees being applied directly to offset the debit balance now and that's why there is no credit or is he not crediting the fee at all to the account now? This is what I would like to know.

Second where is the legal proceeding going? This guy lost hundreds of millions of dollars of client funds, has he been reported to the authority, police, FBI, SEC, NFA/CFTC so a freeze can be put in place on optionsellers.com's company funds and on his personal funds?

 

[PJB1994]

So is the fees being applied directly to offset the debit balance now and that's why there is no credit or is he not crediting the fee at all to the account now? This is what I would like to know.

Second where is the legal proceeding going? This guy lost hundreds of millions of dollars of client funds, has he been reported to the authority, police, FBI, SEC, NFA/CFTC so a freeze can be put in place on optionsellers.com's company funds and on his personal funds?

The debit balances still exist - no money was contributed from the firm. The clients are still responsible to pay the entire balance.

There is a class action lawsuit forming led by a lawyer from Ohio. Apparently he’s been in contact with 100 victims. He’s in the process of getting people to sign retainer agreements. Not sure if anything has been done to inform authorities but agree we need to get moving on that.

 

[JSOP]

The debit balances still exist - no money was contributed from the firm. The clients are still responsible to pay the entire balance.

There is a class action lawsuit forming led by a lawyer from Ohio. Apparently he’s been in contact with 100 victims. He’s in the process of getting people to sign retainer agreements. Not sure if anything has been done to inform authorities but agree we need to get moving on that.

So he's not refunding the fees anymore like he said in the video? What an a$$. The law firm is Chapman & Albin right? Have you signed up with them?

 

[Overnight]

Him deleting the vid from his channel didn't save him. Everyone's got it now.

 

[ET180]

Similar to insurance, most of the time it's not used. OptionSellers was paid to manage the risk otherwise.

But the fact that the insurance usually costs several hundreds or thousands of dollars implies risk. If there was no risk, there would be no need for the insurance. I agree with your second point that something went very wrong for you to end up losing more than your initial money invested. That's not supposed to happen. The money manager made a huge mistake.

How about you share your compassion with the investors who lost big time. I am sure they deeply appreciate your concerns. Remember the Madoff case? That smirking schmuck ruined people's lives forever, several of his investors committed suicide. Even his brother I think committed suicide if I remember correctly. I think your compassion is misplaced and should be given to the investors this guy fucked so badly.

No money manager will guarantee a minimal return. Most money managers probably have a negative return YTD so far. Somewhere in the contract, there should have been the legal disclaimer that all money invested could be lost. So whoever gave the money to be invested should understand that risk.

Regarding Madoff, was it prudent for someone to give his/her entire net worth to one individual to invest? Was that a good idea? I don't think so. If I put my entire net worth in Bitcoin at the top of the market only to realize a 75% loss in net worth (so far), would it be appropriate for me to kill myself over that mistake? I'd argue that suicide is never an appropriate response. Sorry, no one put a gun to the head of investors and forced them to give the guy their money. They could have invested the money in lots of other places.

 

[ET180]

Social media was in its infancy during the financial crises. If we have another, with Madoff level scams look out. The bankers and 1% will not fair well next time.

Not really. Facebook had been around since 2004. Twitter 2005 if I recall correctly. There was the whole occupy movement in 2011. I agree that social media is becoming more of an echo chamber and likely fueled several protests that turned into riots.

 

[Sig]

Second where is the legal proceeding going? This guy lost hundreds of millions of dollars of client funds, has he been reported to the authority, police, FBI, SEC, NFA/CFTC so a freeze can be put in place on optionsellers.com's company funds and on his personal funds?

While he certainly may have broken one or more criminal laws it's not obvious that he has. Big boys and girls hired him to manage their investment, if they didn't realize they could lose some or all of it then it's difficult to summon any sympathy for them. If a financial adviser's portfolio is down 5% should the poice/FBI/SEC/NFA/CFTC investigate? 15%, 30%.. Warren Buffet as lost hundreds of millions of dollars of his clients money in weeks that BRK goes down, do we call the police? It's criminal to lose clients funds doing things other than investing in what you said you were investing in. It's not criminal to make an investment with clients funds in the product you told them you were investing in that eventually ends up at zero or less than zero, which appears to be the case here. And hopefully never becomes criminal!

Presumably it's a corporation and absent criminal activity there's no cause to freeze funds of a shareholder of that corporation, again let's hope we never get to the point where that happens. This all get's handled in civil and bankruptcy court, happens every day.

 

[JSOP]

While he certainly may have broken one or more criminal laws it's not obvious that he has. Big boys and girls hired him to manage their investment, if they didn't realize they could lose some or all of it then it's difficult to summon any sympathy for them. If a financial adviser's portfolio is down 5% should the poice/FBI/SEC/NFA/CFTC investigate? 15%, 30%.. Warren Buffet as lost hundreds of millions of dollars of his clients money in weeks that BRK goes down, do we call the police? It's criminal to lose clients funds doing things other than investing in what you said you were investing in. It's not criminal to make an investment with clients funds in the product you told them you were investing in that eventually ends up at zero or less than zero, which appears to be the case here. And hopefully never becomes criminal!

Presumably it's a corporation and absent criminal activity there's no cause to freeze funds of a shareholder of that corporation, again let's hope we never get to the point where that happens. This all get's handled in civil and bankruptcy court, happens every day.

First of all, their portfolio is not just down 5% or 10% or 20%, no they are down 110%!! They all lost more than what they put in. And second the guy didn't really advise them specifically what he was going to do, what instruments what he was going to invest in, for how much, whether margin is going to be used, the risk control that he's putting in place, no all he assured them was he's investing their money in very safe investment, in very safe methods with high returns and he's going to use vertical spreads. It turns out he was naked short selling options with no hedging, no vertical spreads, on options on futures, a 2-degree derivative. To me, a 2-degree derivative does not qualify as "very safe investment", certainly not to the people who have given him the POA to trade their funds once they are explained exactly what they are. So right off the bat, the guy is guilty of misrepresentation, trading in investment unsuitable to clients' risk tolerance, fraud, trading in manner and with instruments unauthorized by clients...

All it comes down to is what their POA says.

 

[Sig]

First of all, their portfolio is not just down 5% or 10% or 20%, no they are down 110%!! They all lost more than what they put in. And second the guy didn't really advise them specifically what he was going to do, what instruments what he was going to invest in, for how much, whether margin is going to be used, the risk control that he's putting in place, no all he assured them was he's investing their money in very safe investment, in very safe methods with high returns and he's going to use vertical spreads. It turns out he was naked short selling options with no hedging, no vertical spreads, on options on futures, a 2-degree derivative. To me, a 2-degree derivative does not qualify as "very safe investment", certainly not to the people who have given him the POA to trade their funds once they are explained exactly what they are. So right off the bat, the guy is guilty of misrepresentation, trading in investment unsuitable to clients' risk tolerance, fraud, trading in manner and with instruments unauthorized by clients...

All it comes down to is what their POA says.

It does come down to the agreement and if he was trading in a way that was opposed to the disclosure you're right, there is a potential consumer protection violation. I would point out that it's a different thing to say you'll trade only covered puts, for example, and then sell naked puts then it is to not specify exactly how you'll trade and then sell naked puts. A lot harder to prove criminal activity in the latter. And the point stands that there just isn't a law that says "loss of X% is OK but X%+.001 is criminal". Realistically would be pretty difficult to have such a law. So it really doesn't matter how far their portfolios are down when determining if it's a criminal matter that the police/FBI should be involved in. And I still have a hard time mustering any sympathy for anyone who gives POA to someone allegedly promising them "safe" double digit returns.

 

[JSOP]

It does come down to the agreement and if he was trading in a way that was opposed to the disclosure you're right, there is a potential consumer protection violation. I would point out that it's a different thing to say you'll trade only covered puts, for example, and then sell naked puts then it is to not specify exactly how you'll trade and then sell naked puts. A lot harder to prove criminal activity in the latter. And the point stands that there just isn't a law that says "loss of X% is OK but X%+.001 is criminal". Realistically would be pretty difficult to have such a law. So it really doesn't matter how far their portfolios are down when determining if it's a criminal matter that the police/FBI should be involved in. And I still have a hard time mustering any sympathy for anyone who gives POA to someone allegedly promising them "safe" double digit returns.

The 2 points that I see that the court will dwelling the most time and energy on is:

1) He told them he will do vertical spreads but did naked shorts

2) Qualifying options on futures as "very safe investment" while they are not suitable investment for clients according to clients' wishes and needs.

These clients are not investment professionals nor are they knowledgeable about how investments returns work and they are related to risk. Since he said he could do it and he's got 20+ years of experience doing it and he's an expert featured on various famous investment publications and platforms like Marketwatch, CNN, CNBC, Wall Street Journal then he must know something that they don't. It's just like somebody who has this nearly impossible surgery, 99% of the surgeons say they can't do it but this 1 surgeon says he can and he can do it with no risk and he will be very careful, there is safeguards in place, he's done it for 20+ years, and he's featured on various prominent medical journals, are you going to believe him? Of course you would and so did these 290 clients.

At least NFA/CFTC and SEC should be involved and FBI should be involved as well to investigate and at least freeze the funds. If there is any chance for recovery of losses, his company's and his own funds need to be frozen.