The parents of a University of Nebraska student who killed himself after mistakenly believing he owed $730,000 to Robinhood have filed a wrongful death lawsuit against the stock-trading app, CBS reported.
20-year-old Alexander Kearns was trading on June 11 last year using the Robinhood app when the app suddenly put a hold on his account and showed a negative balance of $730,000 and that he needed to pay over $170,000 in the coming days, according to CBS.
“He thought he blew up his life,” Alex’s dad, Dan Kearns, said in an interview with the news outlet. “He thought he screwed up beyond repair.”
Alexander Kearns reportedly jumped in front of an approaching freight train on June 12 after leaving a suicide note detailing his predicament at finding the negative balance.
“How was a 20-year-old with no income able to get assigned almost a million dollars worth of leverage?”, the suicide note read.
Alex had been trading options, rather than stocks, so the negative balance was probably a temporary amount that showed until the options settled to his account, according to the report.
He sent emails three times to Robinhood but received only auto response that representatives would get back to him when they could, the report said. There was no customer service number to call.
The next day, June 12, Alex killed himself by stepping in front of an oncoming train.
His parents are now suing Robinhood for wrongful death, negligent infliction of emotional distress and unfair business practices.
Alex’s parents said that Robinhood targeted young and inexperienced customers, then pushed them to engage in risky trading practices. And when those investors needed help — as Alex did the day he died — Robinhood provided no “meaningful customer support,” the suit says.
“I can’t tell you how incredibly painful it is. It’s the kind of pain that I don’t think should be humanly possible for a parent to overcome,” Alex’s heartbroken mother, Dorothy Kearns said.
Ironically, the app got back to the inexperienced trader the day after his suicide, saying, “Great news! We’re reaching out to confirm that you’ve met your margin call and we’ve lifted your trade restrictions,” according to the report.
Alex’s dad, Dan said Robinhood should have stronger measures in place to screen for trader experience.
“How are those guardrails? How does that — how does that stop an 18-year-old from making risky trades that they don’t really understand?” Dan told CBS, referring to a screener question that allows someone to trade even if they respond that they don’t have much experience.
“The information they gave him was just incredibly skewed and possibly completely wrong,” said Benjamin Blakeman, the Kearns family lawyer.
“Because they make it look like you owe $730,000 when you really don’t owe anything,” Blakeman told the outlet. “That could panic just about anybody.”
Robinhood told CBS of the changes the company had made since Alex’s painful death, including adding instructions and educational materials for options trading and adding screening for experience for riskier trades.
The trading app also now has a call-back option from a live agent and a mechanism in place to escalate emails like the one that Alex sent, CBS reported.
“We remain committed to making Robinhood a place to learn and invest responsibly. Our mission is to democratize finance for all,” a spokesperson for the app told CBS.
“We designed Robinhood to be mobile-first and intuitive, with the goal of making investing feel more familiar and less daunting for an entire generation of people previously cut out of the financial system,” the statement continued.
Robinhood, the Silicon Valley company has faced increasing criticisms recently from regulators and traders.