The family of a 20-year-old student who took his own life after believing that he had accumulated large commercial losses at Robinhood Markets Inc. filed a lawsuit against the company, saying that his “reckless conduct directly and approximately caused the death of one of his victims. “
The father, mother and sister of Alex Kearns, a Robinhood user and a graduate student at the University of Nebraska-Lincoln, said in a complaint filed in the California state court on Monday that Robinhood contributed to his death through “misleading communications” about your investments and “virtually nonexistent” Customer Service. They are seeking unspecified damage.
“We were devastated by the death of Alex Kearns,” said a spokesman for Robinhood via email. “We remain committed to making Robinhood a place to learn and invest responsibly.
Robinhood was one of the biggest beneficiaries of the boom in retail trade during the pandemic blockades, which reached new heights last month with the GameStop craze Corp.
GME -6.01%
and other actions favored by Reddit’s WallStreetBets forum. The company has accumulated about 20 million users by the end of last year, and executives told investors that Robinhood is planning an initial public offering in the first half of 2021, The Wall Street Journal previously reported.
In just five days, GameStop’s stock soared up to 500%. WSJ looked at how Reddit posts, videos on YouTube and tweets from personalities, including Elon Musk, spread online and fueled a craze for negotiations that turned Wall Street upside down. Photo illustration: George Downs / WSJ
But amid Robinhood’s growth, the company sometimes failed to prioritize things like customer service, communications and risk management.
Kearns initiated a sophisticated options trading through Robinhood, in which he believed his maximum loss was limited to less than $ 10,000, the complaint said. One weekend in June, Robinhood sent an email to Kearns to alert him that he needed to deposit around $ 178,000 in a few days to help rectify a negative balance, which the app showed to be around US $ 730,000, according to the claim.
Kearns sent an email to Robinhood’s customer support team three times during the night asking for more information, but received only automatically generated responses, the complaint said. He wrote a note to his family asking how someone with his inexperience could negotiate so easily and then killed himself, the complaint said.
You need help? The National Suicide Prevention Lifeline contact number is 1-800-273-8255.
Robinhood’s e-mails did not inform Mr. Kearns that the $ 730,000 negative balance may have referred to just one leg of his deal and that he had compensation options that he could exercise that would have “more than covered his obligation” said the complaint. Robinhood does not maintain hotlines for customers to call, so Mr. Kearns did not have the option of contacting a live agent over the phone.
“Although Alex’s panic and confusion were clearly caused by Robinhood’s misleading communications, it was impossible to reach Robinhood at the most critical time to repair the damage he had created,” said the complaint.
Since June, Robinhood has added more educational tools and materials on options and revised its eligibility requirements for options trading, a spokesman said by email. The company also changed its customer service protocols to scale assistance requests with exercise and early option assignment and added “live voice support” for customers with recently opened or expired option positions, he said.
Robinhood is also facing class action lawsuits from dozens of customers over his decision last month to restrict the trade in GameStop and other rising stocks.
—Kirsten Grind contributed to this article.
Write to Peter Rudegeair at [email protected]
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