LOS ANGELES – The family of a novice stock trader who killed himself after mistakenly believing he lost more than $700,000 are suing Robinhood Financial, claiming the popular stock-trading platform’s business practices “directly” led to their son’s death.
The complaint, filed Monday in state court in Santa Clara County, California, seeks unspecified damages on behalf of the parents and sister of Alex Kearns for wrongful death, negligent infliction of emotional distress and unfair business practices.
Kearns, a student at the University of Nebraska-Lincoln, was 20 when he took his life last June after he misunderstood a potential loss from a stock-options trade.
In the lawsuit, Kearns’ parents and sister assert that Robinhood employed “aggressive tactics and strategy to lure inexperienced and unsophisticated investors, including Alex, to take big risks with the lure of tantalizing profits.”
Robinhood also provided little or no investment guidance to its users, and its customer service was limited to automated e-mails, according to the complaint.
Kearns received emails from Robinhood shortly after 11 p.m. on June 11, informing him that his account was restricted and that he was required to buy $700,000 in shares as a result of an options trade, according to the lawsuit. That left Kearns’ account with a negative balance of $730,000 on a trade that he had understood would be limited to a maximum loss of less than $10,000, the lawsuit says.
Kearns, desperate for answers, sent several emails to Robinhood’s customer support, but only received auto-generated replies, according to the lawsuit. Then, after 3:30 a.m., Kearns got an email from Robinhood saying he needed to deposit more than $178,000 within seven days to begin to address the negative balance, according to the lawsuit.
“Tragically, Robinhood’s communications were completely misleading, because, in reality, Alex did not owe any money; he held options in his account that more than covered his obligation, and the massive negative balance would have been erased by the exercise and settlement of the” options Kearns held, according to the lawsuit.