An online brokerage firm that only provided routine business functions is not liable for $25 million lost by investors who funded a 20-year-old novice trader’s private hedge fund, the Supreme Court of Ohio ruled today.

In a 6-1 decision, the Supreme Court reversed an Eighth District Court of Appeals decision, which had found more trial court proceedings were required to determine if Interactive Brokers (IB) could be held liable for the losses incurred by the Epitome Investment Fund. The fund’s sole creator and operator, Constantine Antonas, was not a licensed investment adviser.

Antonas was 20 when he opened the fund and began trading on IB’s platform. After his death, the investors filed a lawsuit against IB, claiming that it violated R.C. 1707.43(A), which holds every person liable for participating in or aiding the seller in any way in the illegal sale of securities.

Writing for the Court majority, Justice Megan E. Shanahan explained that the law applies to every person whose conduct brings about the unlawful securities sale, but it does not apply to every person whose business functions are tied to the brokerage accounts after the sale occurs.

“Routine brokerage-firm functions that occur after the unlawful sale of securities by the firm’s customers are not acts that constitute participating or aiding in making such sale,” Justice Shanahan wrote.

Chief Justice Sharon L. Kennedy and Justices Patrick F. Fischer, R. Patrick DeWine, Joseph T. Deters, and Daniel R. Hawkins joined Justice Shanahan’s opinion.

In a dissenting opinion, Justice Jennifer Brunner wrote that further factual development of the investors’ claims against IB should have taken place in the trial court. The investors claimed that IB ignored several “red flags” and could have prevented some of Antonas’ unlawful trades.

Because the law holds financial institutions liable if they help the seller of illegal securities “in any way,” the trial court, not the Supreme Court, should have scrutinized the allegations against IB to determine if the company violated the law. Instead, the trial court dismissed the case before allowing the parties to develop the evidence, she noted.

“Once again, we have unnecessarily and unfairly deprived the parties of the right to seek justice before a trial even begins,” Justice Brunner wrote.

She wrote the Court should have considered the case as improvidently accepted and let stand the Eighth District’s decision to remand the case to the trial court.

Investors Seek to Recoup Losses
Antonas managed the Epitome fund between 2015 and 2021. The investors said that Antonas solicited investors by promising “‘high risk-adjusted returns’ with limited downside risk.” He collected about $25 million.

Antonas was not registered with the Securities and Exchange Commission as an investment adviser and did not qualify for an exemption that would have allowed him to invest without registration. To set up the hedge fund to trade on IB, Antonas prepared a private placement memorandum (PPM) naming IB as the hedge fund's broker.

IB operates a global online platform, which clears trades for account holders. IB complied with a federal anti-money laundering law, which required identity verification and documentation from Antonas. IB opened a trading account for Epitome, allowing Antonas to deposit investor funds into the account and make trades.

Antonas lost nearly all the investments through speculative trading. He died in 2021, leaving the investors with no recourse against him. The investors sued IB in Cuyahoga County Common Pleas Court, alleging that the firm violated R.C. 1707.43(A) by participating in or aiding Antonas in selling illegal securities. The 21 investors alleged that IB reviewed and approved the PPM despite several red flags, including that Antonas listed his home address as Epitome’s principal place of business and identified himself as a 20-year-old who was not licensed to sell securities.  The investors alleged that IB reviewed the PPM before opening Epitome’s account, but the Court concluded those allegations did not tie IB to the solicitation, negotiation, or execution of any sale of securities.

In response to the lawsuit, IB asked the trial court to dismiss the case, arguing the firm could not be sued under R.C. 1707.43(A) because the investors had not alleged that IB played any role in Antonas’ solicitation or any sales he made. The trial court agreed with IB and dismissed the case.

The investors appealed to the Eighth District, which reversed the trial court’s decision and directed it to engage in further proceedings. IB appealed the Eighth District’s decision to the Supreme Court.

Supreme Court Analyzed Security Law
Ohio, like other states, has a “Blue Sky Law,” which regulates the sales of securities. The law states that every person who has participated in or aided the seller “in making such sale” is liable to the purchaser if a sale violates R.C. Chapter 1707. The phrase ties the liability to the sale itself, Justice Shanahan explained. A connection to the broader investment transaction is not enough; the statute demands involvement in the sale to the purchaser, the opinion stated.  Justice Shanahan explained that R.C. 1707.43(A) requires a nexus between the defendant’s conduct and the unlawful sale itself, and that routine brokerage services performed before or after the sale do not constitute participation in making the sale.

The investors argued that allowing Antonas to open an account after reviewing his PPM lent legitimacy to Antonas’ scheme.

“But they do not allege that IB drafted, endorsed, or distributed the PPM to them, or that IB played any role in presenting the PPM to them,” the opinion stated.

By failing to demonstrate a connection between IB and the investors’ purchasing decisions, the allegation is too remote to meet the requirement that IB participated or aided Antonas in the sale, the Court stated.

Justice Brunner, in her dissent, stated the trial court should have considered whether IB’s failure to reasonably monitor Antonas’ activity amounted to participation in or aiding the unlawful sales of securities. The majority opinion held that any alleged compliance duties of IB after the sale do not constitute participating in or aiding the unlawful sale of securities.

The Court reinstated the trial court’s decision to dismiss the case.

2024-1290. Bitounis v. Interactive Brokers LLC, Slip Opinion No. 2026-Ohio-2268.

View oral argument video of this case.

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