The Investor’s Watchdog

The Investor's Watchdog

Tampa-Based Victims Sue INTL FCStone for $9.5 Million

Monday, January 14, 2019

On Friday, INTL FCStone customers sued the company for its role in the debacle that caused 290 investors to lose over $150 million. According to the lawsuit, ten Florida families lost $9.5 million because FCStone failed to have adequate policies and procedures in place to detect and prevent the losses suffered, failed to know its customers, and failed to conduct adequate due diligence on, the advisor trading its customers’ accounts.

The Florida victims all invested money at FCStone through According to the complaint, “ recruited hundreds of investors to open discretionary accounts at FCStone by promising them high returns and fastidious risk management, including through hedging strategies, diversification across many non-correlated commodities, and maintenance of substantial cash “hold-back” positions.” The lawsuit alleges, FCStone was required to have systems and procedures in place to prevent large losses to the accounts. Attorney, Jason Albin, whose law firm ChapmanAlbin LLC represents the investors, says “FCStone knew it was required to mitigate risk and preserve the value of its customers’ accounts because the CFTC fined it $1.5 million in 2013 for substantially similar misconduct and ordered it to clean up its act.” According to the complaint, FCStone “chose to ignore risks to appease which was generating outsized commission for FCStone.”

The complaint alleges that during the week of November 12, FCStone “turned a blind-eye as its account holders’ assets became increasingly concentrated in highly volatile natural gas and crude oil options positions.” was betting prices would remain stable or that natural gas prices would drop and crude oil prices would rise. If they had, would have made a small profit on the options contracts. It turned out was on the wrong side of those bets. On November 14, natural gas prices spiked and crude oil prices dropped, causing losses in the investor accounts that exceeded the account values. Mr. Albin said “FCStone was allowing to take extraordinary risks for a very small return.”

On November 15, principal James Cordier notified FCStone customers of their losses and margin debt in an email titled “Catastrophic Loss Event.” On the same day, FCStone sent an email to clients with an attached letter informing them their margin debt payments were due by the close of business that same day.

The losses to investors were truly catastrophic. One investor from Fort Myers, Florida lost $1.8 million and owes $571,000. He is 79 years old and now worries he will never be able to retire. Another investor from the Tampa area lost $450,000 and owes $125,000. He says the devastating losses to his family’s retirement are negatively impacting their health. None of the investors realized they could wake up one day to discover they had not only lost all the money in their accounts, but also owe money to FCStone. Attorney Jason Albin says, “the saddest part about this whole mess is that it could have been avoided if FCStone had just done its job.”

Author: Jason T. Albin

Jason Albin is an Attorney and Partner at ChapmanAlbin, the investor rights law firm. He has represented hundreds of investors who have lost money due to broker misconduct, unsuitable investment advice and fraud.​ Jason also represents individuals in “whistleblower” suits filed against unscrupulous companies that try to defraud the US federal and state governments.

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