James Cordier: Tragedy or Laughingstock? (Part 3)

Speaking of mass deception, as I did regarding James Cordier and Optionsellers.com, I found a December 2018 press release from a legal firm that states:

     > Cordier marketed himself as a leading market expert. He co-
     > authored a book titled “The Complete Guide to Option Selling.”
     > In May, he penned a bylined article in Futures magazine about
     > the perils of trading in the gas market.

He cautioned about the perils of trading natural gas before getting blown up by it himself?! My eyebrows are raised…

     > In a 2013 lawsuit filed by the U.S. Commodity Futures Trading
     > Commission (CFTC), James Cordier, president of OptionSellers.com,
     > his partner Michael Gross, and former firm Liberty Trading Group
     > were charged nearly $50,000 for improper trading.

Any fines or citation from the CFTC are never good to see and certainly do not engender trust.

     > Separately, FCStone was involved in its own natural-gas options
     > controversy in 2013. As reported in a CFTC notice in May [2013],
     > the CFTC fined the company $1.5 million for a failure “to prevent
     > an unchecked customer from taking grossly excessive risks” and
     > the brokerage ended up with losses of $127 million.*

FCStone was the brokerage used for Cordier’s trades. Again, this is not good to see.

As these details incrementally cast doubt on Cordier’s enterprise, we must not ignore the fact that the legal firm itself has underlying motives: new business through representation of damaged investors.

The press release continues:

     > Investors in this situation should seek legal counsel now to
     > protect their rights and avoid being wiped out twice. Ironically,
     > you have a hedge fund here that didn’t hedge. Worse yet, the

As mentioned in Part 2, this was not a hedge fund but rather separately managed accounts (SMA). I believe hedge fund risk is limited to no more than the total investment. If that is true, then I am surprised to see an attorney make this obvious mistake.

     > brokerage firm that cleared and executed these trades is now
     > seeking to collect an additional $35 million in margin calls
     > from the same investors that just got wiped out … and also
     > putting the squeeze on them to relinquish their legal rights.
     > This has turned into a real double-whammy nightmare for
     > investors in OptionSellers.com natural gas scheme.

Yes on the double whammy, but if all this was agreed and consented to beforehand as SMA (see fourth paragraph of Part 2), then I really don’t see what liability James Cordier has.

I do see some exaggeration on the part of the legal firm here. The waters are muddy, and as with so many stories and lawsuits, it’s hard to know which side (if) is to blame.

* I wonder how much FCStone will be fined this time since Cordier was clearly taking “grossly excessive risks”
   in losing $150M for his clients.