“If he had managed to speak to someone … he would be alive today,” Dan told CNN Business in an interview.
The Kearns family is suing Robinhood for the unjust death of his son, who – like an increasing number of novice traders – turned to the free trading app to gain access to sophisticated financial instruments, such as options.
The tragedy drew attention to the potential dangers of the free trade boom that Robinhood and his gamified platform helped to unleash.
“It’s almost as if he had martyred himself just to save us from what he thought was a huge financial burden, which of course is not the case,” said Dan.
Robinhood under fire
Alex Kearns’ Robinhood account showed a negative balance of $ 730,000 – much more money than he had in his name, according to the lawsuit.
“Anyone would be panicked to see these numbers on the screen,” his mother, Dorothy, said in the interview.
Alex did not realize that his negative balance would have been erased by the exercise and settlement of the options he had, the family said. He really didn’t owe that impressive amount.
“In the first place, he should not have been allowed to trade these complicated options. He had no training, neither income nor qualifications to make these sophisticated trades,” said Dan.
The suit, which describes Alex as a “real idiot with a great sense of humor” and a “heart of gold”, argues that Robinhood attracts inexperienced investors to take big risks – without providing the necessary customer support and investment guidance.
In a statement, Robinhood said that to determine eligibility for options trading, the company assesses clients’ investment experience and knowledge, investment objectives and financial information, such as revenue. For existing customers, Robinhood said that he considers his trading activity on the platform.
Robinhood added that “they always seek to comply with the applicable rules and regulations” of the Securities and Exchange Commission and the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA).
After the Kearns process, Robinhood said he made a number of improvements to his options offering, including guidance on helping customers, updates on how to display purchasing power and live voice support for customers with open option positions.
“We were devastated by the death of Alex Kearns,” said Robinhood. “We remain committed to making Robinhood a place to learn and invest responsibly.”
Frantic search for answers
The nightmare for the Kearns family began on June 11, 2020, when the holder of the options Alex had sold exercised his options, forcing the 20-year-old to buy the title, according to the lawsuit.
At 11:01 pm that night, Robinhood notified Alex Kearns by email that his account was restricted, meaning that he could not make further negotiations or withdrawals, the suit said. Minutes later, another email indicated that he was required to buy more than $ 700,000 in shares as part of the options trade, according to the suit.
Even though Alex thought he could only lose $ 10,000 at most, after seeing the Robinhood app, he believed he had somehow lost $ 730,000, the suit said.
Desperate for answers, Alex sent Robinhood an e-mail asking for help three times that night and the next morning, the family said.
At the time, Robinhood responded to customer support requests exclusively by email, Dan said.
Robinhood did not respond to questions from CNN Business about his customer support.
Alex never heard from Robinhood other than automatically generated responses, according to the process. He took his own life on June 12.
“I was shocked,” said Dan about knowing that his son tried and failed to get Robinhood’s help. “To be honest, it hurt a lot because … I knew what he was going through. I was just visualizing what he was going through when he was writing the notes and seeing those emails, without being able to contact anyone.”
‘He needed a little help’
Before he died, Alex left a note indicating his confusion about trading options and explaining that he did not want to die.
“The put options I bought / sold should have canceled too, but I also have no idea what I was doing now,” wrote Alex, according to the lawsuit. “There was no intention of receiving so much and taking so much risk, and I just thought I was risking the money that I really had.
Alex’s parents expressed frustration that their son did not have a way to communicate more quickly with Robinhood.
“He is in a complete state of panic. He needed a little help. I think that would be all it would take to calm him down,” said Dan.
In addition to the unjust death, the Illinois family complaint accuses Robinhood of negligent infliction of emotional suffering and unfair business practices. The damages they claim will be determined later.
Changes in Robinhood
Alex’s parents expressed hope that their lawsuit will bring awareness to some of the risks that come with trading on Robinhood.
After Alex’s death, Robinhood CEO Vlad Tenev and former co-CEO Baiju Bhatt wrote that they were “personally devastated by this tragedy” and promised to make improvements to their platform.
“We are grateful for that message. And he reinforced those words with a very large donation for the prevention of suicide,” said Dan, referring to Tenev. “I believe he is sorry for that and for our situation.”
The company announced in June that it was making a $ 250,000 donation to the American Foundation for Suicide Prevention and asked people in trouble to seek help.
Robinhood said this week that the recent changes include new financial criteria and revised experience requirements for new clients looking to negotiate advanced option strategies and plans to expand to other situations. Robinhood has also changed its system to escalate email support requests from some option traders and provide live voice support for clients with open option positions.
The Kearns family expressed support for these changes, but said Tenev and Robinhood needed to take further action, including additional telephone support.
“I don’t think he has made adequate progress to protect immature novice investors like my son,” said Dan.
Asked to respond to those who would argue that Alex was responsible for the investment decisions he made, Dorothy said it was not about her son betting a lot of money.
“It would be different if he made investment decisions and lost a lot of money based on those decisions and committed suicide,” she said. “It would still be tragic, but we wouldn’t be here today … because that would have been his fault.”
Instead, Dorothy said she believed Robinhood was responsible for leaving his son confused and unanswered.
“If he had gotten an answer from Robinhood, or if there had been some kind of warning on the screen,” she said, “it wouldn’t have been a problem.”