The parents of a 20-year-old man who committed suicide after thinking he lost nearly three-quarters of a million dollars on the investing and trading app Robinhood filed a lawsuit against the company.
The death of Alex Kearns was a result of negligent infliction of emotional distress and unfair business practices by Robinhood Markets Incorporated, parents Dan and Dorothy Kearns and sister Sydney Kearns alleged in a lawsuit filed with the Santa Clara Superior Court on Tuesday.
“Robinhood built out its trading platform to look much like a videogame to attract young users and minimize the appearance of real-world risk,” the plaintiffs said. “But this is not a game. Defendants’ reckless conduct directly and proximately caused the death of one of its victims. The distress, and the suicide, of this victim was foreseeable. … Defendants cannot escape the consequences of their actions; they must be held accountable.”
Kearns executed an options trade that resulted in a negative cash balance of $730,165.72, prompting him to contact Robinhood’s customer support team, according to the filing.
At 3:26 a.m. on June 12, 2020, the student received an automated email telling him that his account didn’t meet the “cash requirements” for the earlier trade and that he needed to deposit $178,612.73 within a matter of days, the plaintiffs alleged. Kearns’s other trade options would have “more than covered his obligation,” a fact that Robinhood neglected to mention in its correspondence, according to the lawsuit.
Kearns ended his life on June 12, 2020, reportedly by riding his bicycle in front of an oncoming train. The college student’s suicide note, as quoted in the plaintiffs’ lawsuit, faulted the trading app for his death.
“F— Robinhood. I was starting to look forward to my future … before I hit this painful speed bump,” the University of Nebraska sophomore allegedly wrote. “The amount of guilt I feel as I commit to this is endless — I did not want to die.”
The next day, after Kearns had ended his life, he allegedly received an email saying, “Great news!” which was accompanied by a note that the restrictions had been removed from his account.
Robinhood told the Washington Examiner it was “devastated” by Kearns’s death.
“We were devastated by Alex Kearns’ death,” a Robinhood spokesperson said. “Since June, we’ve made improvements to our options offering. These include adding 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. We also changed our protocol to escalate customers who email us for help with exercise and early assignment. We remain committed to making Robinhood a place to learn and invest responsibly.”
The changes do not address the core issues that resulted in Kearns’s death, the grieving family said, warning that others might suffer similar losses if Robinhood’s business practices are allowed to continue.
“Robinhood’s response has faced criticism for falling woefully short of meaningfully addressing its problems. … Robinhood’s business practices remain reckless and fall exceedingly short of satisfying its duty of care to its customers,” says the Feb. 8 filing. “As a direct and proximate result of Robinhood’s acts and/or omissions, Plaintiffs have sustained damages in the worst way—the loss of someone they love. And if Robinhood is not held accountable, there will be many more families to share in Plaintiffs’ pain.”
Robinhood has become a household name in recent weeks as the platform has faced criticism from customers and politicians on both sides of the aisle after thousand-fold price surges in shares of GameStop prompted the company to introduce trading restrictions on a number of high-volatility stocks, at one point barring customers from purchasing shares of GameStop at all. The GameStop stock surged when a group of investors on Reddit disrupted institutional short investments, which cost firms billions.
Several lawsuits have been filed against the company as a result, and both the House Financial Services Committee and the Senate Banking Committee plan to hold hearings to address the market activity and Robinhood’s policies.
