Feb 09, 2021 02:52 AM EST
On Monday, February 8, trading app Robinhood allegedly was sued for the wrongful death by the family of Alex Kearns, a 20-year-old user.
Reportedly, Kearns took his own life last summer after thinking he had racked up massive losses on the trading app that is hugely favored by millennial and amateur investors.
"This case centers on Robinhood's aggressive tactics and strategy to lure inexperienced and unsophisticated investors, including Alex, to take big risks with the lure of tantalizing profits," read the complaint that Alex's parents Dan and Dorothy Kearns, and his sister Sydney Kearns filed in a California state court in Santa Clara.
The whole family is based in Naperville, Illinois.
The complaint further claimed that the app has engaged "reckless conduct directly and proximately caused the death of one of its victims."
The lawsuit is also accusing the brokerage of being negligent and as a result, causing emotional distress on its clients, including Alex. The family is also accusing Robinhood of carrying out unfair business practices.
Allegedly, Alex Kearns, a then-sophomore at the University of Nebraska at Lincoln, thought he had a negative $730,165 cash balance on Robinhood. The lost amount was so big and unfathomable for Alex that he committed suicide.
The complaint alleges that Kearns misunderstood the Robinhood financial statement. The young man therefore decided to take his own life to protect his family from the financial obligation.
The suit says that Kearns tried to contact Robinhood customer service a total of three times regarding the massive underwater balance but could not get through. Instead, his urgency was only met with automated replies, according to the complaint.
In the alleged suicide note that CNBC was able to see, Kearns was reportedly accusing and ranting against Robinhood for piling on too much risk on him. Alex, in his note, reportedly wrote that the puts he bought and the shares sold "should have cancelled out."
Puts refer to he options that provide the owner the right to sell a security at a particular price.
Alex allegedly also wrote that he has "no clue" what he was doing.
"How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?" read the note Kearns reportedly left for his family. "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."
"He thought he blew up his life. He thought he screwed up beyond repair," Dan Kearns, Alex's dad, said in an interview with CBS News.
What made the alleged suicide worse was that after it happened, Robinhood sent another automated reply, but bearing some "good news."
It turned out that he didn't own any money at all, but Alex was not able to know that.
"Great news!" the email - another automated message - said, according to CBS News. "We're reaching out to confirm that you've met your margin call and we've lifted your trade restrictions. If you have any questions about your margin call, please feel free to reach out. We're happy to help!
A Robinhood spokesperson told CNBC, "We were devastated by Alex Kearns' death. Since June, we've made improvements to our options offering."
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