“Robinhood has expanded its trading platform to look a lot like a video game to attract young users and minimize the occurrence of real risks,” reads the lawsuit filed in California on Monday by Kearns’ parents, Dan and Dorothy and sister Sydney, has been submitted.
In addition to the unlawful death, the lawsuit filed by the Illinois family accuses Robinhood of negligent infliction of emotional strain and unfair business practices. The damage they claim will be determined later.
“Tragically, Robinhood’s communication was completely misleading because Alex did not really owe any money,” the lawsuit said.
The tragedy illustrates the potential dangers of the free-education tree created mainly by Robinhood, which had explosive growth during the pandemic.
In a statement, Robinhood explained that it has made a number of improvements to its offering offerings, including providing guidance to help customers, updates on how it displays purchasing power and direct customer support with open options positions.
“We were devastated by Alex Kearns’ death,” Robinhood said. “We remain committed to making Robinhood a place to learn and invest responsibly.”
‘He was in a total panic’
Kearns, who started using Robinhood when he was a high school senior, died of suicide in June after placing an option-spread trade with a risk Alex did not understand, according to the lawsuit. His Robinhood account reflects a negative cash balance of $ 730,000 – far more money than he, the lawsuit said.
“He was in a total panic. His panic and desperation grew because he could not communicate with anyone on Robinhood for a number of hours, ‘the lawsuit said, adding that he had repeatedly tried to reach out to company representatives.
In addition to the tragedy, Kearns did not realize that his massive negative balance would be erased by exercising and settling options he had, the lawsuit said.
“Robinhood never bothered to explain it to Alex or respond to his increasingly desperate pleas for help,” the lawsuit said.
The family squarely blamed Kearns’ panic on Robinhood.
“This led to a very distressed state of mind in Alex, an uncontrollable impulse to commit suicide as the only option he could see,” they said.
Changes by Robinhood
Before Kearns took his own life, he left a note indicating his confusion.
“How could a 20-year-old with no income get a leverage value of almost $ 1 million,” reads the note according to the lawsuit, adding that these were his last known written words.
After Kearns’ death, Robinhood’s co – founders wrote that they were “personally devastated by this tragedy” and promised to improve its implementation.
Robinhood said this week that the changes include new financial criteria and revised experience requirements for new customers dealing with advanced option strategies and plans to extend them to other use cases. Robinhood has also changed its system to increase email support requests from some option traders.