Two Client Couples Sue Advisor Over Risky Strategies

The Elzeas “were not sophisticated investors and were fearful of losses as they had sustained during the Covid-19 crash,” the complaint contends. In their investment advisory relationship, Brunin had discretionary authority to invest their portfolio “in a manner consistent with [their] best interests,” it says.

In March 2024, the couple requested a meeting to discuss Deborah Elzea-Jostes’ early retirement; at the time, David Elzea was already 65 years old, according to the suit. The Elzeas wanted to discuss fixed investments as a safe way to fund their retirement. “They had recently gone to a seminar of a rival investment advisor who promised 5% annual returns with fixed investments,” the lawsuit states, noting such vehicles carry little to no risk.

“Brunin responded that they should not be in fixed investments and he could obtain returns of ‘5% all day long’ and indicated that the investments they had seen were unwise,” the suit contends. Brunin presented his algorithm showing best- and worst-case scenarios, indicating the funds would grow significantly without suffering losses, the complaint alleges.

“Defendants assured Plaintiffs that their existing savings were sufficient for Plaintiff Deborah Elzea-Jostes to also retire — despite her being well below retirement age and the couple holding a $550,000 mortgage, with a daughter who suffers from disabilities,” the lawsuit states.

A week later, “Deborah Elzea-Jostes retired from her career to devote her time to meaningful volunteer work in children’s health,” it says.

Algorithmic Trade Gone Wrong

The Elzeas “repeatedly emphasized that they were not sophisticated about markets, returns or risks and had elected to go with a professional, so they could rely upon Defendant’s expertise,” the suit contends.

Brunin and Navigation exercised discretionary control over the Elzeas' accounts and invested 100% of their assets in equities — initially in S&P 500 stocks and later shifting entirely to small-cap equities in the Russell 2000 index, according to the lawsuit.

This asset allocation was inconsistent with the Elzeas’ risk tolerance, the industry standard for retirees and the fundamental principles of diversification, the complaint contends. The advisor also used algorithms to execute the trades, with trades “often triggered … without oversight from licensed advisors,” it says.

“Defendants continued to engage in market timing and other risky strategies, which proved to be wrong, including panic selling after a Japanese yen report caused the S&P 500 market to dip 11% in a single day, only to rebound days later. An appropriate investment allocation and management would not have been susceptible to such volatility,” the lawsuit contends.

Brunin’s “faulty attempts at market timing, reliance on faulty proprietary algorithms and overall risk taking and lack of diversification, resulted in an estimated $210,000 in lost portfolio value from March to September 2024,” the Elzeas allege.

The couple requested an urgent meeting with Brunin at one point and he delayed the meeting, explaining that he would be on vacation. On Aug. 4, while he was on vacation, all the Elzeas' stocks were sold, “resulting in a loss of over $200,000,” the lawsuit alleges.

When Brunin was available six days after the meeting request, “the damage had been done, as all of their assets held in equities had been moved to cash assets by one of Defendant’s colleagues, none of whom are trading qualified, or by an automated trading system while he was out of office,” the lawsuit alleges.

Brunin’s vacation “left no representative to oversee the automated trading,” the lawsuit states.

The advisor admitted in phone calls to the Elzeas after the sale that selling equities at a market low was not aligned with his instincts or professional experience, “but that his algorithms were responsible,” the complaint alleges.

Other Clients 'Similarly Angry'

Brunin admitted in these calls that the Elzeas’ anger was justified “and that all of his clients were similarly angry at him,” the suit says. Meanwhile, it adds, the S&P 500 saw record gains around 22% during this period, and interest-bearing accounts offered 5% risk-free returns.

Zyk, a grocery clerk, and Flanagan, a school district administrative employee, had limited investing history, and entrusted Brunin and his firm with almost all their liquid savings — about $210,000 — which came from the sale of their home, the suit says.

Had Brunin ascertained their level of investment sophistication and risk tolerance and applied those factors, “only conservative investments should have been provided,” the lawsuit contends.

Brunin initially invested about 80% of Zyk and Flanagan’s funds in an iShares Russell 2000 index fund, which invests in the “highly aggressive,” small-cap Russell 2000 index, the complaint states. He invested the remainder in Direxion Daily Small Cap Bull 3X Shares (TNA), a triple leveraged ETF keyed to the performance of about 2000 small-cap stocks, the suit says.

“Both investments were too aggressive for the Zyk Plaintiffs. Further, the investment left them overconcentrated in small cap stocks considering their investment sophistication and risk tolerance,” the complaint contends

Leveraged ETFs like TNA reset on a daily basis, it notes. “This means that the losses can compound exponentially in a stock downturn. The industry standard is that such investments are suitable only for the speculative, sophisticated investors, and then only suitable as an intra-day hedge,” the lawsuit states.

These leveraged investments weren’t suitable for any retail investor and not in Zyk and Flanagan’s best interests, but Brunin routinely invested them in these ETFs “and left them in such positions for weeks,” the lawsuit alleges.

Brunin went back and forth between funds and cash, a market timing strategy that was too aggressive for the couple, according to the lawsuit, which noted that last August, the portfolio lost about $25,000, or 12% of its value, damage that wouldn’t have occurred with “suitable and appropriate investments.”

Last October, after Zyk and Flanagan complained, Brunin and Navigation moved their funds to a money market account, but in December moved them to index funds and triple-leveraged index funds, causing additional losses, according to the suit.

In early 2025, as the stock market made gains, the portfolio continued to lose value, the lawsuit contends.

All the plaintiffs seek compensatory and other damages.

“I think he got out over his skis,” Pederson, the plaintiffs’ lawyer, told ThinkAdvisor in a phone interview, calling leveraged ETFs “where money goes to die.”

An ETF triple leveraged to the Russell 2000 is “insanely aggressive,” he said.

As for the Elzeas, Pederson said, “They were looking for conservative income so they could retire. Now they’re retired and they can’t get back into the workforce.”

Brunin did not immediately respond to a phone message or a message sent through a contact form on his firm’s website Wednesday.

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