Justia Ohio Supreme Court Opinion Summaries

A group of investors lost money after purchasing interests in a hedge fund operated by Constantine Antonas between 2015 and 2021. Antonas was not a registered investment adviser and did not qualify for an exemption from registration. He solicited investments using a Private Placement Memorandum (PPM) that identified a brokerage firm as the fund’s broker, which the investors claimed gave legitimacy to the scheme. After collecting approximately $25 million, Antonas lost nearly all the funds through speculative trades and died in 2021, leaving the investors without recourse against him.The investors filed suit in the Cuyahoga County Court of Common Pleas against the brokerage firm, alleging that it had participated in or aided Antonas's unlawful sale of securities in violation of Ohio law, specifically R.C. 1707.43(A). They argued that because the brokerage firm reviewed the PPM and performed routine account setup and compliance procedures before and after the fund’s account was opened, it should be liable for their losses. The trial court dismissed the amended complaint for failure to state a claim. However, the Eighth District Court of Appeals reversed, holding that the investors' allegations were sufficient to state a claim for relief under R.C. 1707.43(A).The Supreme Court of Ohio reviewed the case and held that R.C. 1707.43(A) does not impose liability on a brokerage firm for routine business activities performed after an unlawful sale of securities has occurred. The Court found no nexus between the brokerage firm's conduct and the solicitation, negotiation, or execution of the specific securities sales to the investors. As a result, the Supreme Court of Ohio reversed the appellate court’s decision and reinstated the trial court’s dismissal of the amended complaint. View "Bitounis v. Interactive Brokers, L.L.C." on Justia Law

The Supreme Court answered a question certified to it by the United States Court of Appeals for the Sixth Circuit by holding that Ohio Rev. Code 1707.43, a provision of the Ohio Securities Act, does not impose joint and several liability on persons who aided in the purchase of illegal securities but did not participate or aid in the sale of the illegal securities.Plaintiffs filed a class action lawsuit in federal court seeking to hold Defendants, two trust companies, liable under the Ohio Securities Act, Ohio Rev. Code 1707.01 et seq., for their alleged roles in a Ponzi scheme. The district court granted Defendants’ motions to dismiss, holding that the trust companies’ mere involvement in the transactions at issue was insufficient to impose liability on them under the Act. The court of appeals then certified the above question to the Supreme Court. The Court answered that section 1707.43 does not impose joint and several liability on a person who, acting as the custodian of a self-directed individual retirement account (IRA), purchased, on behalf and at the direction of the owner of the self-directed IRA, illegal securities. View "Boyd v. Kingdom Trust Co." on Justia Law