Trading app Robinhood sued for wrongful death of 20-year-old trader
AhmadArdity / Pixabay
Trading app Robinhood sued for wrongful death of 20-year-old trader

The parents of a deceased amateur investor sued the financial trading app Robinhood Monday for the wrongful death of their son, Alex Kearns, who committed suicide last June mistakenly believing that he had lost $730,000 in a trade on the app.

According to the lawsuit, Kearns’ last written words were, “How was a 20-year-old with no income able to get assigned almost $1 million worth of leverage?” Kearns, who had been investing on the Robinhood app since he was a high schooler, had started experimenting with options trading prior to his death. Options contracts are riskier financial instruments than simply buying or selling stocks, with the potential for both magnified gains and losses.

Kearns received a notification from Robinhood in June that he owed $730,000, with over $170,000 due immediately. He reached out to Robinhood’s customer service multiple times, only to receive an automated reply. Later that day, Kearns ran in front of an oncoming train. In fact, the options contracts Kearns had remaining in his account more than covered the $730,000 balance, and, just a day after his death, Robinhood sent an email stating that the issue was resolved.

The Kearns’ lawsuit against Robinhood alleges that the company has gamified stock trading in a manner designed to target young, inexperienced investors. The complaint further argues that amateur traders should not be given easy access to sophisticated instruments such as options contracts and that Robinhood should provide non-automated customer service.

In response to Kearns’ death, Robinhood has added educational materials and a live customer support chat function for users trading options. The app now also restricts options trading for inexperienced users, but the restrictions are largely self-declared and easy to bypass.

This lawsuit against Robinhood comes amidst ongoing controversy after the company halted purchases of GameStop securities during a “short squeeze” by non-institutional investors. A class-action lawsuit was filed against Robinhood last week.