Yeah, this is disturbing. Either Phantasmo was, in 1940, the first and only super-hero with the power of super-nudity, or this is the most unfortunate coloring error in comics history. Other covers at the GCD show it to be the latter. Too bad, because a nudist super-hero would have been much wackier. I can see it now: Sworn to avenge himself after the murder of his pants, millionaire businessman Buck Dekan swore to use his fists and his shrink-wrapped package to battle crime as Phantasmo, the Bareassed Battler!
...Yeah, maybe not. Anyway, I don't know about you, but I want the Master of the World to fucking wear pants, okay? And that's the naked truth.