![]() ![]() “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,” the company said. The measures include adding more educational materials on options trading and new financial criteria and experience requirements for new customers seeking to trade some options. Robinhood, which is based in Menlo Park, California, issued a statement in response to the lawsuit Monday saying it was devastated by Kearns’ death and has since made improvements to its options offerings. “This resulted in a highly distressed mental condition in Alex, an uncontrollable impulse to commit suicide as the only option he could see,” according to the lawsuit. “Tragically, 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 the exercise and settlement of the” options Kearns held, according to the lawsuit.Īfter not being able to speak with anyone from Robinhood, Kearns became more desperate and fearful of the mammoth financial obligation, according to the complaint. Then, after 3:30 a.m., Kearns got an email from Robinhood saying he needed to deposit more than $178,000 within seven days to begin to address the negative balance, according to the lawsuit. Kearns, desperate for answers, sent several emails to Robinhood’s customer support, but only received auto-generated replies, according to the lawsuit. That left Kearns’ account with a negative balance of $730,000 on a trade that he had understood would be limited to a maximum loss of less than $10,000, the lawsuit says. on June 11, informing him that his account was restricted and that he was required to buy $700,000 in shares as a result of an options trade, according to the lawsuit. Kearns received emails from Robinhood shortly after 11 p.m. Robinhood also provided little or no investment guidance to its users, and its customer service was limited to automated e-mails, according to the complaint. In the lawsuit, Kearns’ parents and sister assert that Robinhood employed “aggressive tactics and strategy to lure inexperienced and unsophisticated investors, including Alex, to take big risks with the lure of tantalizing profits.” Kearns, a student at the University of Nebraska-Lincoln, was 20 when he took his life last June after he misunderstood a potential loss from a stock-options trade. The complaint, filed Monday in state court in Santa Clara County, California, seeks unspecified damages on behalf of the parents and sister of Alex Kearns for wrongful death, negligent infliction of emotional distress and unfair business practices. The family of a novice stock trader who killed himself after mistakenly believing he lost more than $700,000 are suing Robinhood Financial, claiming the popular stock-trading platform’s business practices “directly” led to their son’s death. Please look at the time stamp on the story to see when it was last updated. Qualified users can apply in the app to trade options contracts, inherently risky investments that give buyers the right, but not the obligation, to buy or sell a stock at a certain price within a certain period.This is an archived article and the information in the article may be outdated. Robinhood, one of the first companies to make commission-free stock trading commonplace, is worth more than $8 billion following its latest round of funding. ![]() They're not thinking about basic design flaws - anyone who cares about financial responsibility to anyone wouldn't put a negative cash balance in front of somebody without some sort of warning or reasonable customer support." ![]() "They're asking millennials to trust them with their savings, and they're turning it into, in my opinion, into a game. "This story has to be told, and they need to answer the questions," he told Business Insider. However, he said he also wanted to know how the balance was displayed in the first place and how Robinhood plans to prevent similar incidents in the future. "All of us at Robinhood are deeply saddened to hear this terrible news and we reached out to share our condolences with the family over the weekend," the company said.īrewster commended the company for reaching out and offering a "senior-level" employee for conversation. A Robinhood representative told Business Insider that it would not share any details about the account, citing privacy concerns.
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