The family of a 20-year old man who took his own life over the winter after he misread his investment balance on Robinhood on Monday filed a lawsuit against the brokerage app.
In June 2020, Alex Kearns was a 20-year-old sophomore at the University of Nebraska at Lincoln when he checked his Robinhood financial statement and may have mistakenly interpreted it to mean that he had accumulated a negative $US730,165 ($947,024) cash balance. Although screenshots obtained by CNBC do appear to show Kearns’ account in the negatives, the number in question might have actually reflecting “buying power” within the app rather than debt, and could have been the result of a pending options trade or the value of stocks tied to those options.
Either way, Kearns panicked, and in a suicide note addressed to his family he accused Robinhood of allowing him to take on too much risk for a person who had “no clue” what he was doing.
“How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?” the note read. “There was no intention to be assigned this much and take this much risk, and I only thought that I was risking the money that I actually owned.”
In Monday’s complaint, filed in a California state court in Santa Clara by Kearns’ parents, Dan and Dorothy, and his sister, Sydney, the family wrote that Robinhood’s “reckless conduct directly and proximately caused the death of one of its victims,” and said that it intends to target the app’s “aggressive tactics and strategy to lure inexperienced and unsophisticated investors, including Alex, to take big risks with the lure of tantalising profits.”
Before taking his own life, Kearns reportedly attempted to contact Robinhood’s customer service hotline at least three times to discuss his negative balance, but each time was met with automated replies. In a statement, Robinhood reps said the platform had “added live voice support for customers with an open options position or recent expiration,” in December, and planned to expand support for other situations.
Robinhood is also currently the subject of a class action lawsuit over its recent decision to limit shares on certain trades relating to the recent r/WallStreetBets and GameStop fiasco.