“Robinhood has built its trading platform to look like a video game to attract young users and minimize real-world risk,” Kearns’ parents Dan and Dorothy and sister said in a lawsuit in California on Monday. Sydney.
In addition to the unjust death, the Illinois family’s complaint accuses Robinhood of negligently provoking emotional stress and unfair business practices. The damage they seek will be determined at a later date.
“Tragically, Robinhood’s communications were completely misleading because, in reality, Alex did not owe money,” the lawsuit said.
The tragedy illustrated the potential dangers of the free trade explosion largely triggered by Robinhood, which enjoyed explosive growth during the pandemic.
In a statement, Robinhood explained that it has made a number of improvements to its options offering, including providing guidance to help customers, updates on how it displays purchasing power, and live voice support for customers with open options positions.
“We were devastated by the death of Alex Kearns,” Robinhood said. “We remain committed to making Robinhood a place of responsible learning and investment.”
“He was in a complete panic”
Kearns, who started using Robinhood when he was a senior in high school, died by suicide in June after placing an option-spreading transaction containing a “Alex didn’t understand” risk, according to the lawsuit. His Robinhood account reflected a negative cash balance of $ 730,000 – much more money than he had, the lawsuit said.
“He was in a complete panic. His panic and despair grew because he could not communicate for several hours with anyone at Robinhood,” the lawsuit said, adding that he had repeatedly tried and failed to contact company representatives. .
In addition to the tragedy, Kearns did not realize that his massive negative balance would have been erased by exercising and resolving his options, the lawsuit said.
“Robinhood never bothered to explain this to Alex or respond to his increasingly desperate requests for help,” the lawsuit said.
The family blamed Kearns’ panic on Robinhood.
“This led to a very disturbed mental illness in Alex, an uncontrollable urge to commit suicide as the only option he could see,” they said.
Changes to Robinhood
Before taking his own life, Kearns left a note that signaled confusion.
“How could a low-income 20-year-old receive a leverage of nearly $ 1 million,” the lawsuit said, adding that these were his last known written words.
After Kearns’ death, Robinhood’s co-founders wrote that they were “personally destroyed by this tragedy” and promised to make improvements to its application.
Robinhood said this week that its changes include new financial criteria and revised experience requirements for new customers who want to trade advanced option strategies and intend to extend this to other use cases. Robinhood has also changed its system to intensify email support requests from option traders.