Current Events > Family of novice investor who killed himself sue Robinhood.

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https://www.click2houston.com/business/2021/02/09/family-of-novice-investor-who-killed-himself-sue-robinhood/

"LOS ANGELES 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 platforms business practices directly led to their sons death.
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.
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.
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.
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.
Kearns received emails from Robinhood shortly after 11 p.m. 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. 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.
Kearns, desperate for answers, sent several emails to Robinhoods customer support, but only received auto-generated replies, according to the lawsuit. 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.
Tragically, Robinhoods 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.

After not being able to speak with anyone from Robinhood, Kearns became more desperate and fearful of the mammoth financial obligation, according to the complaint.
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.
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. 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.
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.
Robinhood has drawn criticism and regulatory scrutiny in its drive to bring more regular people into investing, not just wealthy investors already well versed in the markets.

In December, regulators in Massachusetts filed an administrative complaint against the company, alleging that Robinhood violated securities laws by aggressively marketing itself to Massachusetts investors without regard for the best interest of its customers. At the time, Robinhood said it disagreed with the complaint and intended to mount a vigorous defense.
Critics say Robinhood makes trading stocks and exchange-traded funds so cheap, easy and maybe even fun, it could be enabling unsophisticated investors to buy and sell too-risky investments too often.
The company tells customers on its website that they can level up with options trading, for example. With options, investors buy a contract that gives them the possibility of buying or selling a stock or ETF in the future at a set price. Trading options allows for potentially big profits at a low initial cost, but it can also be riskier than buying a plain vanilla share of stock if the bet goes the wrong way. And if traders borrow money to juice their options trades, it raises the risk even more.

Robinhood nevertheless has forced huge, ground-shaking changes for the brokerage industry. Its decision to charge zero commissions for customers trading stocks and ETFs pushed the industrys biggest players to eventually follow suit and to band together. Charles Schwab bought TD Ameritrade and Morgan Stanley acquired E-Trade Financial to try to be more competitive.
Investors on Robinhood and other trading platforms have also influenced prices on Wall Street. Analysts credit these investors with helping drive shares sharply higher last month in GameStop and AMC Entertainment, and in Tesla and other Big Tech companies last summer while the economy struggled."

TL;DR but if this robin hood service gave misinformation regarding what the Investor owes then I can see a case.

sLaCkEr408___RJ posted...

TL;DR but if this robin hood service gave misinformation regarding what the Investor owes then I can see a case.

"Kearns received emails from Robinhood shortly after 11 p.m. 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. 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.
Kearns, desperate for answers, sent several emails to Robinhoods customer support, but only received auto-generated replies, according to the lawsuit. 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.
Tragically, Robinhoods 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.

After not being able to speak with anyone from Robinhood, Kearns became more desperate and fearful of the mammoth financial obligation, according to the complaint.
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."

sLaCkEr408___RJ posted...

TL;DR but if this robin hood service gave misinformation regarding what the Investor owes then I can see a case.

They did. The victim was made to think he owed thousands of dollars. Only after he was dead did they send an email correcting the issue and saying he didn't owe any money

good, fuck that Kylo Ren looking CEO

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Fuck Robinhood

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I don't like RH at all but I have to imagine the person had other underlying psychological issues going on that he took such a drastic decision really shortly after receiving the notification.

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They need to just crack down on options in general. Too many ways to take on risk.

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Hexenherz posted...

I don't like RH at all but I have to imagine the person had other underlying psychological issues going on that he took su easy to start feeling that way. It's scary really.ch a drastic decision really shortly after receiving the notification.

Man when you think you done fucked up your money REALLY bad it is really easy to start thinking that way.

Cocytus posted...

claiming the popular stock-trading platforms business practices directly led to their sons death.

There is no way Robinhood can be held responsible for something like this.

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Oh yeah I can imagine. I would have been shitting myself for sure. It's a sad thing that happened.

Guess I'm curious to see what happens with the case and what the consequences are for future investors.

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Hayame Zero posted...

There is no way Robinhood can be held responsible for something like this.

Those emails tho

That's sad as fuck, dude literally thought he had ruined his life

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eston posted...

That's sad as fuck, dude literally thought he had ruined his life

Yeah, for real. And turns out he didn't at all.

Also surprised he got automated responses at all when he contacted them.

I sent two CS requests through two different channels to them a couple of weeks ago and didn't get any notification that they received or were processing the requests.

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Hexenherz posted...

Also surprised he got automated responses at all when he contacted them.

I sent two CS requests through two different channels to them a couple of weeks ago and didn't get any notification that they received or were processing the requests.

Fly-by-night company a la dogpile

lawsuit time

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Conflict posted...

Sheesh, I remember reading about another incident just like this a year ago. Some person who was new to investing thought they were like a million dollars in debt due to a clerical error.

I was thinking about that guy too, if we're thinking about the same guy.

yesterday a guy said in the politics form that robinhood had given him a case number and were looking into it so it was his fault for not waiting and all i could think is that the consistent brainwashing by fox that corporations are people too has finally worked.

how could anyone expect a 20 year old to react rationally when they think theyve just screwed their entire family out of their life savings. he had no reason to think robinhood had made a mistake he just thought he had somehow made a massive mistake and took drastic actions. id ask anyone who is 20 to respond rationally to that. do you guys not remember how you acted when you were young over your first breakup? did you act perfectly rationally?

he was a 20 year old kid...it is on robinhood not to threaten their clients accidentally especially when their threats are flat out just a lie.

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Given the colossal mess that's happened the past couple weeks with stock restricting, trade manipulation and extremely late customer service responses that cost people millions of dollars during closed market hours, the parents are definitely justified here.

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lemondrop7 posted...

how could anyone expect a 20 year old to react rationally when they think theyve just screwed their entire family out of their life savings. he had no reason to think robinhood had made a mistake he just thought he had somehow made a massive mistake and took drastic actions. id ask anyone who is 20 to respond rationally to that. do you guys not remember how you acted when you were young over your first breakup? did you act perfectly rationally?

Just like at the casinos if you cant handle the loss, dont take the risk. This man took the risk but couldnt handle the loss, that's all there is to it.

And can people stop referring to 20yos as kids? Their young adults at the least.

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this 20 year old child should have never been allowed to sign up to trade

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BignutzisBack posted...

Fuck Robinhood

The Trent posted...

this 20 year old child should have never been allowed to sign up to trade

[LFAQs-redacted-quote]

Didn't someone in one of the Stock General topics also allude to going out?

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KaZooo posted...

Didn't someone in one of the Stock General topics also allude to going out?

yes that shit was not cool
get your shit together people

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Prismsblade posted...

Just like at the casinos if you cant handle the loss, dont take the risk. This man took the risk but couldnt handle the loss, that's all there is to it.

And can people stop referring to 20yos as kids? Their young adults at the least.

Except he didn't, lose anything. It was a mistake. He didn't actually owe any money. But they made him think he did

Prismsblade posted...

Just like at the casinos if you cant handle the loss, dont take the risk. This man took the risk but couldnt handle the loss, that's all there is to it.

And can people stop referring to 20yos as kids? Their young adults at the least.

He didnt even really have a loss. How could you be so cold to the human condition. How could this be anything but a tragedy to you.

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Zikten posted...

Except he didn't, lose anything. It was a mistake. He didn't actually owe any money. But they made him think he did

he should've had a much more sound understand of what he was doing
robinhood should've done his homework for him so that he was making good decisions

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lemondrop7 posted...

he was a 20 year old kid...

20 year old adults make huge, life altering mistakes all the time but immediate suicide is never an expected reaction. This is not the argument that you think it is.

WON'T SOMEBODY THINK OF THE CHILDREN
caps lock was on sorry that's not allowed

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KaZooo posted...

Didn't someone in one of the Stock General topics also allude to going out?

That's very sad. But I can imagine how it feels. I lose $200 somewhere-somehow I start trippin'.

Zikten posted...

Except he didn't, lose anything. It was a mistake. He didn't actually owe any money. But they made him think he did

It was a technical mistake, and just like all technical mistakes in this regard you work them out with technical support and get to the bottom of it. Which takes time, a level head, and patience, especially for automated systems such RH.

He didn ,t even really have a loss. How could you be so cold to the human condition. How could this be anything but a tragedy to you.

I am sorry for this man but clearly this individual had serious mental issues but we really need to draw the line at where individuals or companys are responsible for such things. And mentally evaluating people is usually not a brokerage's responsibility.

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Prismsblade posted...

I am sorry for this man but clearly this individual had serious mental issues

You can become instantly suicidal without having mental issues, under certain circumstances.

So many of CE are utterly pathetic, callous people. Even if they are trolling over someone's suicide rather than genuinely hold these shitty stances.

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Cocytus posted...

You can become instantly suicidal without having mental issues, under certain circumstances.

But should someone be held responsible for that? If a woman chose 1 man over the other in a love triangle and the loser commits suicide because of it....is that grounds to sue and or jail the woman and or man because of it?

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He should not have been able to even trade on margin like that since it stated he had no income. So RH is fucked by allowing people without assets to trade with that crazy margin.

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Prismsblade posted...

But should someone be held responsible for that? If a woman chose 1 man over the other in a love triangle and the loser commits suicide because of it....is that grounds to sue and or jail the woman and or man because of it?

A company very well should be held responsible if they're issuing notices of massive debt without either triple-checking they have the right person or making sure their automated software is working.

We know what serious financial loss can do to people.

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Prismsblade posted...

But should someone be held responsible for that? If a woman chose 1 man over the other in a love triangle and the loser commits suicide because of it....is that grounds to sue and or jail the woman and or man because of it?

No, Robinhood can't be held liable. The company has been shitty as of late, but Robinhood did nothing to be "directly" responsible for someone's suicide. An out-of-court settlement is the best the family is going to get.

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Prismsblade posted...

But should someone be held responsible for that? If a woman chose 1 man over the other in a love triangle and the loser commits suicide because of it....is that grounds to sue and or jail the woman and or man because of it?

No, but I don't think we're comparing the same two things here.

Musourenka posted...

We know what serious financial loss can do to people.

Exactly

I don't see this gaining much traction.

On one hand, yeah, 20 yo kid finds out he's supposedly in ridiculous debt before his adult life really starts and has thoughts crossing his mind that he's screwed his family over because that might be more money than they ever knew - not crazy to think he'd be driven to off himself.

On the other hand, all these companies make mistakes. Shorthanded staff/help in a high traffic situation. It's not that they tried to literally scare the kid to death. I'm pretty sure there's some legal protections at play for stuff like this.


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If you're Robinhood, you settle this as quickly as possible, while not admitting guilt

I cant think of a private company less equipped to endure something like this right now, from a public relations standpoint

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I genuinely don't see how Robinhood could be held legally on the hook for this. Don't get me wrong, the whole incident is tragic, but someone killing themselves because of a system error, and the resulting system generated emails is gonna be hard to claim liability on.

I have mixed feelings about RH as a whole. I think it is good that there is a way for more people to directly access the market with limited to no fees and if RH was only allowing folks to buy like regular stocks, it wouldn't be too big a deal, because ultimately they are pretty straightforward. The problem is when you have novice investors getting involved in options and shit that require higher financial literacy and less immediately identifiable risk.

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they won't be held responsible for this legally, that's silly talk
personal responsibility is still a thing and robinhood didn't make this dude make any choices

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Compsognathus posted...

I think it is good that there is a way for more people to directly access the market with limited to no fees

Yeah that was a good marketing gimmick several years ago, but these days almost all the major players offer 100% commission-free trading for many types of assets.

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***UPDATE***

https://www.cnn.com/2021/02/11/investing/robinhood-lawsuit-suicide-alex-kearns/index.html

"'He would be alive today': Parents detail son's desperate attempts to contact Robinhood before he killed himself
After their son's death, Dan and Dorothy Kearns said they were horrified to learn that their panicked 20-year-old repeatedly tried and failed to get in touch with Robinhood about his negative account balance of $730,000.
College student Alex Kearns mistakenly believed he owed that staggering sum of money and took his own life last June after his desperate pleas to Robinhood went unanswered, according to his family. Alex left a note that signaled confusion about his negative Robinhood balance.
"If he had been able to get a hold of somebody...he would be alive today," Dan told CNN Business in an interview.
The Kearns family is suing Robinhood for the wrongful death of their son, who like a growing number of novice traders turned to the free trading app for access to sophisticated financial instruments such as options.

The tragedy has drawn attention to the potential dangers of the free-trading boom that Robinhood and its gamified platform have helped set off.
"It's almost like he martyred himself just to save us from what he thought would be a huge financial burden, which of course, isn't the case," Dan said.

Robinhood under fire
Alex Kearns' Robinhood account showed a negative balance of $730,000 far more money than he had to his name, according to the lawsuit.
"Anyone would be in a state of panic to see those numbers on their 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 options he held, the family said. He didn't really owe that staggering sum.
"He shouldn't have been allowed to trade these complicated options in the first place. He had no training, no income, no qualifications, to make those sophisticated trades," Dan said.
The lawsuit, which describes Alex as a "true goofball with a terrific sense of humor" and a "heart of gold," argues that Robinhood lures 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 customers' investment experience and knowledge, investment objectives, and financial information such as income. For existing customers, Robinhood said it considers their trading activity on the platform.
Robinhood added that they "always seek to comply with applicable" rules and regulations from the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA).
After the Kearns lawsuit, Robinhood said it made a series of improvements to its options offering, including by providing guidance to help customers, updates on how it displays buying power and live voice support for customers with open options positions.
"We were devastated by Alex Kearns' death," Robinhood said. "We remain committed to making Robinhood a place to learn and invest responsibly."
Robinhood has come under fire in recent weeks for temporarily suspending purchases of GameStop (GME) and other stocks favored by an army of traders on Reddit. The controversial step prompted calls for an investigation and Congress to schedule hearings.
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, obligating the 20-year-old to buy the underlying security, according to the lawsuit.
At 11:01 pm that evening, Robinhood notified Alex Kearns by email that his account was restricted, meaning he couldn't make new trades or withdrawals, the lawsuit said. Minutes later, another email indicated he was required to purchase over $700,000 in shares as part of the options trade, according to the lawsuit.

Even though Alex thought he could lose only $10,000 maximum, after seeing the Robinhood app he believed he had somehow lost $730,000, the lawsuit said.
Desperate for answers, Alex emailed Robinhood for help three times that night and the next morning, the family said.

Robinhood did not reply to questions from CNN Business about its customer support.
Alex never heard back from Robinhood beyond auto-generated replies, according to the lawsuit. He took his own life on June 12.
"I was appalled," Dan said about learning his son tried and failed to get help from Robinhood. "It really hurt, to be honest, 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, not being able to reach out to anybody."
'He needed a little help'
Before he died, Alex left a note indicating his confusion about the options trades and explaining that he did not want to die.
"The puts I bought/sold should have cancelled out, too, but I also have no clue what I was doing now in hindsight," Alex wrote, according to the lawsuit. "There was no intention to be assigned this much and take this much risk, and I only thought that I was risking the money that I actually owned."
Alex's parents expressed frustration that their son didn't have a way to communicate more quickly with Robinhood.
"He's in a complete state of panic. He needed a little help. I think that's all it would have taken to calm him down," Dan said.
In addition to wrongful death, the complaint filed by the Illinois family accuses Robinhood of negligent infliction of emotional distress and unfair business practices.

Changes at 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're grateful for that message. And he backed up those words with a very sizable donation to suicide prevention," Dan said, referring to Tenev. "I believe he is remorseful about it and sorry for our situation."
The company announced in June it was making a $250,000 donation to the American Foundation for Suicide Prevention and urged people in trouble to reach out for help.
Robinhood said this week that recent changes include new financial criteria and revised experience requirements for new customers seeking to trade advanced options strategies and plans to expand that to other situations. Robinhood also changed its system to escalate emailed support requests from some options traders and provide live voice support for customers with open options positions.
The Kearns family expressed support for those changes, but they said Tenev and Robinhood, need to take more action, including additional phone support.
"I don't think he's made adequate progress to protect immature novice investors like my son," Dan said.

Asked to respond to those who would argue that Alex was ultimately responsible for the investment decisions he made, Dorothy said this wasn't a matter of her son gambling away too much money.
"It would be different if he made investment decisions and he lost a lot of money based on those decisions and he took his life," she said. "It would still be tragic, but we would not be here today...because that would have been his fault."
Instead, Dorothy said she believes Robinhood bears responsibility for leaving her son confused and without answers.
"If he would've gotten a response from Robinhood, or if there was some sort of disclaimer on the screen," she said, "it wouldn't have been a problem."