United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
C. Seeger United States District Judge.
February 5, 2018, the stock market suffered a historic fall.
The Dow dropped nearly 1, 600 points, and the S&P 500
fell more than four percent. One of the traders caught up in
the freefall was Defendant Gregory Papadopoulos, who traded
commodity futures through his company, Defendant GPPB, LLC.
GPPB's trading account lost nearly $500, 000 in a single
day. Worse yet, the account suffered a negative balance - the
value of GPPB's positions fell from $89, 476 to negative
broker for the account, Plaintiff Ironbeam, Inc., liquidated
GPPB's positions to salvage any remaining value, and
later filed suit against GPPB and Papadopoulos to collect on
the unpaid balance. GPPB did not respond to the Complaint, so
this Court entered a default judgment against the firm.
Ironbeam now moves for summary judgment against Papadopoulos
in his capacity as the guarantor of GPPB's account.
does not dispute the basic facts arrayed against him. He does
not dispute that GPPB owes hundreds of thousands of dollars
to Ironbeam, or that he guaranteed GPPB's obligations.
Instead, Papadopoulos spins a tale that his broker conspired
with the FBI and an organized crime family to cause the
losses. That story, colorful as it may be, suffers from a
complete lack of supporting evidence.
on the undisputed facts, Papadopoulos breached his guarantee
agreement with Ironbeam by failing to pay for GPPB's
losses. Plaintiff's motion for summary judgment  is
granted on the claim under the guarantee agreement.
trading involves “highly leveraged and rapidly
fluctuating markets” that may lead to
“significant losses, ” including losses that
“substantially exceed” a customer's margin
deposits with the broker. See Dckt. No. 59, Ex. C,
at ¶ 2. This case is case in point.
November 15, 2015, Papadopoulos signed a Customer Agreement
and a Personal Guarantee Agreement with Ironbeam, a commodity
broker registered with the Commodity Futures Trading
Commission. See Plaintiff's Statement of
Material Facts in Support of Summary Judgment Motion
(“Statement of Facts”), at ¶¶ 1, 3-5
(Dckt. No. 59); see also Dckt. No. 59, Exs. B, C.
The most basic fact - the identity of the customer - is not
clear from the face of the Customer Agreement itself. The
Customer Agreement refers to the “Customer, ” but
for whatever reason, it does not define who the
“Customer” is. See Dckt. No. 59, Ex. C.
That is, the agreement itself does not reveal whether
Papadopoulos signed on his own behalf, or on behalf of an
Personal Guarantee Agreement - signed the very same day -
fills the gap. That agreement provides that Ironbeam was
“enter[ing] into the Customer Agreement . . . with GPPB
LLC.” Id. Ex. B. The signature block also
sheds some light. Papadopoulos signed the Personal Guarantee
Agreement as the “GENERAL MANAGER” of the
“Account Holder.” Id. (all caps in
original). Taken together, the two agreements establish that
GPPB was the Customer, and Papadopoulos was the
guarantor. That's consistent with the account
statement, too, which identifies the customer as “GPPB
LLC.” See Dckt. No. 59, Ex. D, at 1; see
also Statement of Facts, at ¶ 5 (stating that GPPB
“opened a commodity futures trading account with
the Customer Agreement, Ironbeam agreed to serve as
GPPB's broker for the trade of commodity futures. A
commodity futures contract is an agreement to buy or sell a
commodity at a specific price on a specific date. Each side
of the contract basically makes a bet about the future price
of a commodity. Buyers and sellers place their trades through
registered brokers, who in turn execute the trades with a
futures clearinghouse. See ADM Investor Services, Inc. v.
Collins, 515 F.3d 753, 756 (7th Cir. 2008). The
clearinghouse serves as the middleman: it is the buyer to
each seller, and the seller to each buyer. Id.
futures traders must put money down as a deposit with their
brokers. Known as “margin, ” this deposit
represents “only . . . a fraction of the actual cost on
a trade.” Capital Options Investments, Inc. v.
Goldberg Bros. Commodities, 958 F.2d 186, 188 (7th Cir.
1992). “Margins in the futures markets are not down
payments like stock margins, but are performance bonds
designed to ensure that traders can meet their financial
obligations.” See Economic Purpose of Futures
Markets and How They Work, U.S. Commodity Futures
(last visited Jan. 10, 2020). Margin helps protect brokers
from holding the bag when the traders suffer losses. See
In re MF Global Inc., 531 B.R. 424, 435 (Bankr. S.D.N.Y.
2015) (“Margin is a security deposit to insure that
futures commission merchants have adequate customer funds to
settle open positions and is required by brokerage houses and
exchanges to assure their own financial integrity and the
financial integrity of the entire market place.”)
(quoting Friedman v. Dean Witter and Company, Inc. et
al., Comm. Fut. L. Rep. (CCH) ¶ 21, 307, 1981 WL
26050, at *1 (Nov. 13, 1981)).
can buy positions worth many times more than the margin they
have deposited. But if the value of the positions declines,
the broker can demand more margin from the trader to protect
itself against the risk of loss. See ADM Investor
Services, 515 F.3d at 756. Traders must provide enough
margin so that “short-term price movement[s]” on
the futures contracts won't wipe out their account
balances. Id. Margin reduces the risk posed by
default, particularly given that a “futures contract is
executory; no asset changes hands when the contract is
formed.” Id. (citation omitted).
clearinghouse settles the trades between buyers and sellers,
and sets the minimum margin requirements for all futures
contracts. Id. The brokers, in turn, are responsible
to the clearinghouse for the trades. If a trader suffers
losses that it cannot pay, the broker must pay the
clearinghouse from its own funds. Id. (“The
futures commission merchant then is on the hook, for it is a
condition of participation in these markets that each dealer
guarantee customers' trades.”). To protect
themselves, brokers enter into contracts with their customers
that impose margin requirements and entitle the brokers to
liquidate the customers' positions when necessary.
agreement between Ironbeam and GPPB reflected this industry
practice. Ironbeam's Customer Agreement required GPPB to
keep enough money in its account to meet “applicable .
. . margin requirements, ” as determined by Ironbeam.
Dckt. No. 59, Ex. C, at ¶ 7. “Customer shall,
without notice or demand, maintain adequate margin at all
times so as to continuously meet the margin requirements
established by Ironbeam.” Id.
agreement gave Ironbeam substantial remedies if GPPB did not
provide enough funds to comply with margin requirements.
Ironbeam had the right to close out GPPB's positions -
that is, liquidate them - if GPPB did not post enough margin.
“If at any time Customer's account does not contain
the amount of margin required, Ironbeam may, in its sole and
absolute discretion, without notice or demand to Customer,
close out Customer's open position(s) in whole or in
part, in any manner Ironbeam deems fit, or take any other
action it deems necessary to satisfy such margin
next paragraph of the agreement - entitled
“Liquidation of Accounts” - gave
Ironbeam the power to protect itself by selling GPPB's
In the event of . . . (i) Ironbeam's determination that
any collateral deposited to protect one or more of the
Customer's accounts is inadequate, regardless of current
market quotations to secure the account; or (j) Ironbeam, for
any reason whatsoever, deems itself insecure or if necessary
for Ironbeam's protection, then Ironbeam is hereby
authorized, in its sole discretion, to sell any or all of the
Commodity Interests or other property of Customer which may
be in Ironbeam's possession, or which Ironbeam may be
carrying for Customer, or to buy in any Commodity Interests
or other property of which the account or accounts of
Customer may be short, or cancel any outstanding order, in
order to close out the account ...