A 20-year-old trader using the Robinhood application thought he was worth $ 730,000 in loss and committed suicide. The family of an investor named Alex Kearns filed a lawsuit against Robinhood on Monday.
With the rise of shares such as Robinhood, Tesla and GameStop, which allows investors to trade without paying commission. An investor named Alex Kearns started using this app in the summer of last year and suffered a large amount of loss.
Started trading options
According to the Washington Post, Alex Kearns was spending the summer as a lifeguard. The 20-year-old started using the Robinhood app with the money he received from his family and business. Alex’s father, Dan Kearns, “has saved $ 5,000 at best.” said.
Kearns started trading options in hopes of making high profits. With this hope, the young investor opened a position on June 11. He thought that the maximum loss he could get from this transaction would be $ 10,000.
Kearns received an e-mail from Robinhood on the evening of the same day and found that it was $ 730,165 in losses, not $ 10,000 as he thought.
Tried to contact the support team
Kearns tried to contact the company’s customer service after receiving this message. The investor told the support team, “I see a much larger amount in my account than it should have. The positions I open / close must be in balance with each other. Can anyone be interested? ” sent a message as.
His response was, “We will get back to you as soon as possible. However, you may experience some delays. ” happened. An automatic return was made to him after hours and he was informed that there was “insufficient balance” in his account. According to the report of CBS News, the young investor was told that he had to deposit 178 thousand 612 dollars into his account within a few days.
He committed suicide when he saw that he was in harm
The trader, who studied at the University of Nebraska, committed suicide after seeing that his account was at such loss. Robinhood’s support team returned the day Kearns committed suicide. The email sent by the Robinhood team was as follows:
“Good news. We have determined that you meet the margin requirements and we are unblocking your account. If you have any questions regarding your position, please contact us. ”
Kearns’ family sued Robinhood on February 8, 2021. It is alleged that Robinhood’s support team wouldn’t have committed suicide if they had inspected his account early and found that he could cover the damage instead of sending him an automated email. The following statement was given in the lawsuit filed:
“Alex thought he had to repay the damage on his account. He thought that if he didn’t do something himself, his family would have to pay the debt. ”
Application has been updated
The state of Massachusetts financial regulator William Galvin said there should be a national standard for practices such as Robinhood. It was stated that these practices “appealing to young and inexperienced investors” could be harmful.
The Robinhood team made some updates to the app after Alex Kearns passed away. Before users can trade options anymore, “How much investment experience do you have?” They have to answer the question. Robinhood also shares articles on the risks of options trading. Alex’s father, Dan Kearns, asks the following question:
“Is there such a security check? Will these stop an 18-year-old person who doesn’t know what he’s doing yet? ”
Kearns used the following words in his suicide note:
“How did they let a 20-year-old with no proper income take a $ 1 million position? However, the positions I opened had to balance each other. … My goal was not to take so many risks. I thought I could just lose the money in my account. Robinhood’s ****. “