The family of a 20-year-old merchant who committed suicide after seeing a massive negative balance in his account sued online brokerage Robinhood for wrongful death on Monday. Alex Kearns’ parents and sister said Robinhood takes advantage of inexperienced merchants and that the company’s “misleading communications” caused him panic and ultimately led to his death.
“This case focuses on Robinhood’s aggressive tactics and strategy to entice inexperienced and unsophisticated investors, including Alex, to take big risks with the lure of tempting profits,” the complaint says. “Robinhood’s aggressive tactics to attract young clients, combined with his blatant disregard for his duty to care for his clients, create a time bomb that was destined to lead to the kind of tragedy that befell Alex.” Kearns’ death made headlines last summer, after the young trader was notified that an options trade he had made had resulted in a loss of $ 730,000 and that he needed to immediately deposit around $ 178,000 to resolve the situation. With no way to pay such a sum and fearing that his family would be forced to pay it, Kearns rode his bicycle in front of a train. “How could a 20-year-old with no income receive almost $ 1 million worth of leverage?” wrote in a goodbye note to his parents, according to the lawsuit. Robinhood’s communications with Kearns did not mention that it already had options that would erase the negative balance once resolved, according to the complaint. Read: Trader Beware – Read This Before Buying Stock With Investment Apps Like Robinhood Robinhood didn’t have a customer service phone number, and Kearns’ emails to the company only received automated responses, his family said. One day after his death, Robinhood sent him an automated email saying that the margin call had been made and that he owed nothing. “He thought he had blown up his life. He thought he was hopelessly wrong, ”his father, Dan Kearns, told CBS News on Monday. The lawsuit blames Robinhood’s “reckless conduct” for Kearns’ death, alleging that the company made it too easy for beginning traders with little money and little investment knowledge to make large deals, and offered insufficient customer support. “We were devastated by the death of Alex Kearns,” Robinhood said in a statement. “Since June, we have made improvements to our option offering.” Robinhood, who is popular with younger traders, had been criticized for “gamifying” stock trading and encouraging risky behavior. It also faces lawsuits over recent measures to restrict trading in a number of very short stocks, including GameStop Corp. GME, -5.91%, following wild trading that was stoked by online message boards.