The Meteoric Rise and Devastating Fall of a Canadian Day Trader's Tesla Fortunes

In a remarkable tale of financial triumph and tragedy, a young carpenter from Vancouver Island, Canada, found himself on a rollercoaster ride through the volatile world of stock trading. Christopher DeVocht's journey, from a modest portfolio to amassing a staggering $415 million fortune, and then losing it all, has captivated the financial community and raised questions about the risks and pitfalls of high-stakes investing.

Chasing the Tesla Dream: A Meteoric Rise and a Crushing Downfall

The Humble Beginnings of a Day Trader

Like many aspiring day traders, Christopher DeVocht, a carpenter by trade, began his foray into the financial markets after work, immersing himself in online forums and honing his skills in trading options on Tesla Inc. (TSLA) stock. Little did he know that his passion for trading would soon catapult him into the realm of extraordinary wealth and, ultimately, devastating loss.

A Remarkable Hot Streak

DeVocht's trading prowess was nothing short of remarkable. According to a legal filing, his account with the brokerage division of Royal Bank of Canada (RBC) was worth a modest C$88,000 at the end of 2019. However, within the span of just two years, he had managed to transform that into a staggering C$415 million (approximately $306 million) fortune. This meteoric rise is being hailed as one of the hottest hot streaks in the history of financial markets.

The Fateful Decision to Hold On

Many would have cashed out and secured their newfound wealth, but DeVocht chose a different path. He decided to hold on to his Tesla investments, even as the stock began to decline in 2022. This decision would ultimately prove to be his undoing, as he lost his entire fortune when the Tesla stock plummeted.

The Lawsuit and Allegations of Negligence

Seeking to recoup his losses, DeVocht has filed a lawsuit against RBC Dominion Securities, RBC Wealth Management, and accounting firm Grant Thornton LLP. In the lawsuit, he claims that the advice he received, primarily focused on minimizing taxes, was negligent and failed to take into account his level of financial sophistication. DeVocht alleges that while he was skilled in trading Tesla options, his knowledge of broader financial planning and tax implications was limited.

The Role of the Professionals

According to the complaint, DeVocht was referred to a "coach and coordinator" within RBC, who then connected him with an accountant at Grant Thornton. This team of professionals advised him to incorporate a company, roll all of his securities into it, and conduct trades within the company, with the goal of accumulating as many Tesla shares as possible and holding them for as long as possible. The idea was to convince Canadian tax authorities to view it as an investment holding company, rather than an active trading business, in order to pay lower taxes.

The Risks of Concentration and Leverage

This strategy, according to the lawsuit, led to an "extreme concentration in Tesla" that came with corresponding risks. When the stock soared in 2021, it paid off, with DeVocht's portfolios surging to C$415 million from C$186 million in the span of about eight months. However, when Tesla shares suffered a series of declines and periodic rallies throughout 2022, DeVocht's fortunes took a dramatic turn for the worse.

The Final Downfall

In a desperate attempt to recoup his losses, DeVocht borrowed C$20 million from his corporation and used it to make shorter-term trades in his personal account. This strategy failed, and the money was lost. When Tesla shares saw even steeper declines in October 2022, DeVocht's corporation had to sell its Tesla holdings to repay loans from a margin account it held with RBC, leading to the complete loss of his net worth.

The Aftermath and Seeking Compensation

DeVocht and his corporation are now seeking general damages for breach of contract and negligence from the financial institutions and accounting firm involved. The lawsuit also alleges that RBC's recommendations to make C$25.5 million in charitable donations further eroded a significant chunk of his wealth. As the legal battle unfolds, the case has become a cautionary tale about the risks of concentrated, leveraged investments and the importance of sound financial advice.