On Monday, Robinhood was sued for wrongful death by the family of Alex Kearns, a 20-year-old client who believed he took his own life last summer after suffering a major loss on the millennium-favored stock trading app was.
“The case is based on Robinhood’s aggressive strategy and enticing inexperienced and unskilled investors, including Alex, who takes huge risks with the greed to reduce profits,” his parents Dan and Dorothy Kern and his The complaint filed by sister Sydney Kearns states. A California state court in Santa Clara. The family is located in Naperville, Illinois.
Robinhood’s “reckless conduct directly and caused the death of one of its victims,” according to the complaint. The lawsuit is alleging brokerage by carelessness of emotional distress and unfair business practices.
Alex Kearns, a then-attendant at the University of Nebraska in Lincoln, committed suicide in June thinking that Robinhood had a negative $ 730,165 cash balance.
The complaint alleges that Kearns misunderstood Robinhood’s financial statement and is protecting his family from financial liability.
The suit says that Kearns made three attempts to contact Robinhood customer service about the huge underwater balance.
However, their messages were met with automatic replies, according to the complaint.
In a note given to his family by CNBC, Kearns accused Robinhood of allowing him to pile on too much risk. He claimed that the parts and shares sold by him “must be canceled according to the note”.
Puts are options that give the owner the right to sell the security at a set price.
The businessman said he had “no clue” what he was doing according to the note.
“How was a 20-year-old with no income who was able to make a profit of nearly a million dollars?” Note that Kern wrote to his family. “It had no purpose that I be entrusted to it and it took a lot of risk, and I only thought that I was risking the money that I had owned.”
A Robinhood spokesperson told CNBC, “We were devastated by the death of Alex Kearns. Since June, we have improved our offering of options.”
Robinhood has become a popular entry point to the stock market for first-time investors. It has grown from 1 million users in 2016 to over 13 million last spring. More than 3 million users downloaded Robinhood in a similar January 3 traffic analysis site, amid Reddit’s investor-fueled GameStop drama.
Robinhood, which is run by CEO Vlad Tenev, has come under scrutiny for “simplification” of investment and alleged predator marketing practices.
Robinhood is also facing class-action lawsuits from customers following the app’s decision to ban trading in certain securities during a recent GameSide controversy. The brokerage firm, which plans to go public in 2021, has reiterated that most of its users are long-term investors.
Robinhood, one of the biggest beneficiaries of the boom in the retail business in 2020, has also come to investigate its use without proper investment education to its customers. Last year, Massachusetts regulators filed a complaint against Robinhood, accusing inexperienced investors of trading apps of predator marketing.
The Securities and Exchange Commission accused the brokerage in December of misleading customers about how a stock-trading app makes money and fails to deliver the best execution of trades.
A complaint from Cairns’ family states, “Not only did Robinhood allow Alex to open an account, but when Alex was a fresher in college later that year, it allowed him business options.”
The alleged family in the suit said, “Worse, Robinhood offered almost no investment guidance, and its customer service was’ virtually non-existent consisting of automated e-mail replies devoid of any human contact or contact.”
Here is Robinhood’s full statement about the lawsuit.
“We were devastated by the death of Alex Kearns. Since June, we have improved our offering of options. These include the ability to contract contracts in the app, guidance to help customers through initial assignments, we Includes updates on how to demonstrate purchasing power. More educational content on options, and new financial criteria and revised experience requirements for new customers to trade level 3 options. In early December, we opened an open option position or recent Hee also added live voice support for customers with expiration, and planned to expand. In other use cases. We also changed our protocol to pursue customers who helped us with exercises and early assignments. Email. We are committed to making Robinhood a place to learn and invest responsibly. “
– with reporting from CNBC’s Dan Mangan and Kate Rooney.
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