A Naperville student died by suicide late last year because he believed he had been suddenly thrust into debt amounting to $730,000 — and now his parents are suing trading app “Robinhood” for gross negligence. The lawsuit brief described “reckless conduct directly and proximately caused” the death of 20-year-old Alex Kearns. He studied business and applied much of his education to the markets. He died in June 2020, only 13 hours after learning of the apparent debt.
The complaint contends this wrongful death in Chicago could have been easily avoided with easier-to-understand policies. Alex Kearns’ parents contend damages due to wrongful death, emotional distress, and unfair business practices.
Kearns received a number of emails from the trading app on the night of June 11. According to Robinhood, he was obligated to purchase around $700,000 worth of shares because of the trading options taken, which led to the negative numbers on his balance. Kearns believed he could never lose more than $10K as a result of his trades.
Kearns left a suicide note: “How was a 20-year-old with no income able to get assigned almost a million dollars worth of leverage? 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 owed.”
The lawsuit describes a pattern of habitual targeting of younger customers who don’t know what they’re doing by the app.
The lawsuit brief reads: “Robinhood built out its trading platform to look much like a videogame to attract young users and minimize the appearance of real-world risk. Though Alex was merely a senior in high school when he opened an account with Robinhood and had little or no income, Robinhood determined he was qualified enough to enter into the world of trading sophisticated financial options.”
During the 13-hour period leading up to his death, Alex tried to reach Robinhood’s customer service to no avail. At 3:30 a.m., Kearns was informed that a first payment of over $178K would need to be paid within one week.
The lawsuit went into further detail about the tragedy: “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 [their] exercise and settlement.”
To the parents, Robinhood’s eventual response was too little, too late. A spokesperson for the company said, “We were devastated by Alex Kearns’ death. Since June, we’ve made improvements to our options offering. These include the ability to exercise contracts in the app, guidance to help customers through early assignment, updates to how we display buying power, more educational materials on options, and new financial criteria and revised experience requirements for new customers seeking to trade Level 3 options. In early December, we also added live voice support for customers with an open options position or recent expiration, and plan to expand to other use cases.”