“Robinhood built its commercial platform to look like a video game to attract young users and minimize the onset of real-world risk,” says the lawsuit filed Monday in California by Kearns ’parents Dan and Dorothy and sister Sydney.
In addition to the unjustified death, the complaint filed by the Illinois family accuses Robinhood of causing neglect of emotional stress and unfair business practices. The damages they are seeking will be determined at a later date.
“Tragically, Robinhood’s communications were completely misleading because, in reality, Alex didn’t owe money,” the lawsuit said.
The tragedy illustrated the potential dangers of the free trade boom that was largely caused by Robinhood, which has had explosive growth during the pandemic.
In a statement, Robinhood explained that it has made a number of improvements to its range of options, including providing guidance to help customers, updates on how it displays purchasing power, and live voice support for customers with positions of choice. open options.
“We were devastated by the death of Alex Kearns,” Robinhood said. “We remain committed to making Robinhood a place to learn and invest responsibly.”
“I was totally panicking”
Kearns, who began using Robinhood when he was growing up in high school, died by suicide in June after placing an options trade that contained 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, according to the lawsuit.
“He was totally in a panic. His panic and despair grew as he was unable to communicate for several hours with anyone at Robinhood,” the lawsuit said, adding that he tried and failed to reach representatives. of the company several times.
In addition to the tragedy, Kearns did not realize that its massive negative balance would have been erased by the exercise and settlement of options it had, according to the lawsuit.
“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 resulted in a very distressing mental illness to Alex, an uncontrollable thrust of suicide as the only option he could see,” they said.
Changes to Robinhood
Before taking his own life, Kearns left a note showing his confusion.
“How was it possible for a 20-year-old with no income to be assigned a leverage of nearly $ 1 million,” the note said, according to the lawsuit, which added that these were his last known written words.
After Kearns’ death, the co-founders of Robinhood wrote that they were “personally devastated by this tragedy” and promised to improve their applications.
Robinhood said this week that its changes include new financial criteria and revised experience requirements for new customers who want to negotiate advanced option strategies and plans to extend it to other use cases. Robinhood also changed its system to increase the email support requests of some options traders.