The parents of Alexander Kearns, who killed himself after thinking he had lost $730,000 on stock trading app, Robinhood, have filed a wrongful death lawsuit against Robinhood.
The 20-year-old young man died by suicide in June 2020 shortly after reaching out to Robinhood’s customer service to help him understand why his account showed a negative balance of $730,000 on the stock trading platform.
What is Robinhood, and how does it work?
Robinhood is a relatively new phenomenon in the investing community. The stock-trading app advertises a simple interface and zero commissions that allows inexperienced traders to buy and sell stocks. Many criticize the app for luring uneducated investors into the market and taking advantage of their lack of experience.
Robinhood has dominated app store rankings since the beginning of the COVID-19 pandemic in early 2020. It’s appealing to users because it allows them to invest more than they have without having to use financial brokers or charging commissions.
The stock-trading app has been particularly popular among young individuals with no experience in investing and stocks. Critics say that millions of young traders are lured into buying and selling stocks on Robinhood by the prospect of making big money.
THE wrongful death lawsuit against Robinhood
The family of Alexander Kearns says that Robinhood is partly to blame for their 20-year-old son’s death. Dan and Dorothy Kearns filed a wrongful death lawsuit against the investing app, according to CBS News.
On the day Kearns committed suicide, his account on Robinhood had been restricted and showed a negative cash balance of $730,000. In a suicide note to his parents, Kearns wrote about having “almost $1 million worth of leverage” and that he had “no clue” what went wrong.
In their lawsuit against Robinhood, Kearns’ parents say they believe the app’s response to his questions about the apparent loss of $730,000 contributed to his suicide.
The Kearns family is accusing Robinhood of wrongful death, arguing that the stock-trading app failed to offer “meaningful customer support” to their son, who was desperate to find answers to his questions.
After seeing the negative cash balance, Kearns contacted Robinhood’s customer service to understand why he had accrued the massive debt. The young trader wrote in the email that he was “incorrectly assigned more money than I should have.”
“My bought puts should have covered the puts I sold. Could someone please look into this?” Kearns wrote.
Robinhood sent Kearns an automated message notifying him that the company was “working to get back” to him. The parents say the investment app “must be held accountable” for Kearns’ death because its customer service failed to answer their son’s questions.
The day after his death, Robinhood notified Kearns of lifting his trade restrictions because he’d met his margin call. The family’s attorney, Benjamin Blakeman, told CBS News that Robinhood made it look like Kearns owed the app $730,000 when he actually didn’t owe anything. “That could panic just about anybody,” Blakeman said.
In a statement to Business Insider, a Robinhood spokesperson said the company was “devastated by Alex Kearns’ death.” The spokesperson said that the company had made several improvements to its customer service and other functions since Kearns’ death.
OTHER INVESTOR SUICIDES
Stories of people committing suicide after losing money are not always publicized, which is why the real number of people who kill themselves after running up massive losses is not known.
In 2017, the National Post reported that a man committed suicide after losing over $300,000 in binary option trading. In 2019, a Chinese Bitcoin trader killed himself after losing 2,000 Bitcoins in a highly leveraged trade position, according to Yahoo! Finance.
What do you think? Should there be any limits on the ability of inexperienced investors to trade on margin with money they don’t actually own?