“If he could have caught someone … he would still 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 budding traders – turned to the free trading app for access to advanced financial instruments such as options.
The tragedy has drawn attention to the potential dangers of the free trade boom that helped Robinhood and its gamified platform.
“It’s almost like he killed 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 – a lot more money than he had in his name, the lawsuit said.
“Everyone would panic to see those numbers on their screen,” his mother, Dorothy, said in the interview.
Alex did not realize his negative balance would have been wiped out by the exercise and settlement of options he had, the family said. He didn’t really owe that staggering amount.
He shouldn’t have traded these complicated options in the first place. He had no education, no income, no qualifications to do those sophisticated transactions, ”Dan said.
The lawsuit, which Alex describes as a “real goofball with a great sense of humor” and a “heart of gold,” says 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 whether the company qualifies for options trading, the company assesses client investment experience and knowledge, investment objectives and financial information such as income. For existing clients, Robinhood said it takes into account their trading activity on the platform.
Robinhood added that they “always try to comply with applicable” rules and regulations of the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA).
Following the lawsuit against Kearns, Robinhood said it had made a series of improvements to its options offering, including providing guidance to help customers, updates on how it represents purchasing power, and live voice support for customers with open options.
“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 that Alex had sold exercised his options and required the 20-year-old to buy the underlying asset, the lawsuit said.
At 11:01 p.m. that evening, Robinhood informed Alex Kearns by email that his account was restricted, meaning he could not make any new transactions or withdrawals, the lawsuit said. Minutes later, another email indicated that according to the lawsuit, he had to buy more than $ 700,000 in stock as part of the options trade.
While Alex thought he could lose up to $ 10,000, after seeing the Robinhood app, he thought he had somehow lost $ 730,000, the lawsuit said.
Desperate for answers, Alex emailed Robinhood three times that evening and the next morning for help, the family said.
At the time, Robinhood handled customer support requests exclusively via email, Dan said.
Robinhood did not respond to inquiries from CNN Business about its customer support.
Alex never heard from Robinhood, according to the lawsuit, other than auto-generated responses. He took his own life on June 12.
“I was shocked,” Dan said when he learned that his son was trying and not getting help from Robinhood. “It really hurt, to be honest, because … I knew what he was going through. I just visualized what he was going through when he was writing the notes and seeing those emails without being able to reach anyone.”
‘He needed a little help’
Before he died, Alex left a note pointing out his confusion about options trading and explaining that he did not want to die.
“The wells I bought / sold should have been closed as well, but I also have no idea what I was doing afterwards,” Alex wrote according to the lawsuit. “I didn’t mean to get that much and take that much risk, and I just thought I was risking the money I actually owned.”
Alex’s parents were frustrated that their son had no way to communicate with Robinhood faster.
‘He is in complete panic. He needed a little help. I think that was all it took to calm him down, ”Dan said.
In addition to a wrongful death, the Illinois family complaint accuses Robinhood of negligent inflicting emotional distress and unfair business practices. The damage they seek will be determined at a later date.
Changes at Robinhood
Alex’s parents were hoping their lawsuit will raise awareness of some of the risks involved in trading on Robinhood.
Following Alex’s death, Robinhood CEO Vlad Tenev and former co-CEO Baiju Bhatt wrote that they were “personally devastated by this tragedy” and pledged to make improvements to their platform.
We are grateful for that message. And he backed up those words with a very substantial suicide prevention donation, ‘Dan said, referring to Tenev. “I think he is sorry and sorry about our situation.”
The company announced in June that it would make a $ 250,000 donation to the American Foundation for Suicide Prevention, calling on people in trouble to seek help.
Robinhood said this week that recent changes include new financial criteria and revised experience requirements for new clients who want to trade advanced options strategies and plan to extend that to other situations. Robinhood also changed its system to escalate email support requests from some options traders and provide live voice support to clients with open option 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 has made enough progress to protect immature early stage investors like my son,” said Dan.
Asked to respond to those who would argue that Alex was ultimately responsible for the investment decisions he made, Dorothy said this was not a matter of her son gambling 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 wouldn’t be here today … because that would have been his fault.”
Instead, Dorothy said she believes Robinhood is responsible for leaving her son confused and unanswered.
“Had he 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.”