Yahoo Finance Robinhood sued over suicide of young trader who thought he had lost $730,000
The parents of Alex Kearns, a 20-year-old Robinhood user who died by suicide after mistakenly believing that he had lost a fortune, plan to sue the trading app over his death.
Dan and Dorothy Kearns told CBS News that they will file a lawsuit accusing Robinhood of wrongful death, negligent infliction of emotional distress and unfair business practices.
Mr Kearns, a student at the University of Nebraska who had been investing his savings using the app while living with his parents in Illinois due to the pandemic, took his life last June after having his Robinhood account restricted.
Robinhood has soared to more than 13 million users thanks to its easy trading interface, and says that it is on a mission to "democratise finance". But it has also attracted controversy and a lawsuit from the US state of Massachusetts, which claims that it uses video-game like features to encourage users to trade.
Last week British MPs called for regulators to look into Robinhood and similar low-friction trading apps, saying they could easily "ruin people's lives and leave them penniless".
According to the lawsuit, Mr Kearns was approved to take out options, which carry higher risk than buying shares, despite his financial inexperience. It says that Robinhood then showed him a negative balance of almost $730,000 (£531,330), demanding more than $170,000 within a few days.
The loss was actually temporary, but the app allegedly had no customer service phone line, responding to three emails only with an automated message saying: "Thanks for reaching out to our support team! We're working to get back to you as soon as possible, but that our response time to you may be delayed."
After Alex died, the company is said to have sent him another automated email telling him that he did not owe anything after all. Dan Kearns said: "He thought he blew up his life. He thought he screwed up beyond repair."
The Kearns claim that Robinhood should never have sent their son such a terrifying email without offering him any way to speak to a human about it.
In a note left to his parents, Alex Kearns said he had had "no clue what [he] was doing in hindsight" and that he had never intended to be "assigned this much risk".
"How was a 20-year-old with no income able to get assigned almost $1 million worth of leverage?" he asked, concluding: "F--- Robinhood."
A spokeswoman for Robinhood said: “We were devastated by Alex Kearns’ death. Since June, we’ve made improvements to our options offering.
“These include adding the ability to exercise contracts in the app, guidance to help customers through early assignment, updates to how we display buying power, more educational materials on options, and new financial criteria and revised experience requirements for new customers seeking to trade Level 3 options.
“In early December, we also added live voice support for customers with an open options position or recent expiration, and plan to expand to other use cases.
“We also changed our protocol to escalate customers who email us for help with exercise and early assignment. We remain committed to making Robinhood a place to learn and invest responsibly.”
