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“If he could have got a hold of someone … he would be alive today,” Dan told CNN Business in an interview.
The Kearns family are suing Robinhood for the wrongful death of their son, who – like a growing number of novice traders – have 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 trade boom that Robinhood and its gamified platform helped spark.
“It’s almost like he martyred himself just to save us from what he thought was a huge financial burden, which, of course, isn’t,” Dan said.
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 in a state of panic to see these numbers on their screen,” her mother, Dorothy, said in the interview.
Alex did not realize that his negative balance would have been wiped out by exercising and settling the options he held, the family said. He didn’t really owe that staggering amount.
“He shouldn’t have been allowed to trade these complicated options in the first place. He had no training, no income, no qualifications, to do these sophisticated trades,” Dan said.
The lawsuit, which describes Alex as a “real goofball with a great sense of humor” and a “heart of gold”, argues that Robinhood makes inexperienced investors take big risks – without providing customer support and advice investment required.
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 income. . For existing customers, Robinhood said it takes into account their business activity on the platform.
Robinhood added that they “always seek to comply with applicable rules and regulations” of the Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA).
Following the Kearns trial, Robinhood said it made a series of improvements to its options offering, including providing tips to help customers, updates on how it displays purchasing power, and support live voice for clients with open option positions.
“We were devastated by the death of Alex Kearns,” Robinhood said. “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 underlying stock, according to the lawsuit.
At 11:01 p.m. that night, Robinhood informed Alex Kearns by email that his account was restricted, meaning he couldn’t make any new transactions or withdrawals, according to the lawsuit. Minutes later, another email said he had to buy more than $ 700,000 in stock in options trading, according to the lawsuit.
Even though Alex thought he could only lose a maximum of $ 10,000, after seeing the Robinhood app, he thought he had lost $ 730,000, according to the lawsuit.
Desperate to find answers, Alex emailed Robinhood for help three times that night and the next morning, the family said.
At the time, Robinhood was responding to customer support requests exclusively via email, Dan said.
Robinhood did not respond to questions from CNN Business regarding its customer support.
Alex never got a response from Robinhood beyond the auto-generated responses, according to the lawsuit. He committed suicide on June 12.
“I was appalled,” Dan said when he heard that his son had 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 contact anyone.”
‘He needed a little help’
Before he died, Alex left a note indicating his confusion over options trading and explaining that he did not want to die.
“The puts that I bought / sold should have been canceled as well, but I have no idea what I was doing now in hindsight,” Alex wrote, according to the lawsuit. “There was no intention of being awarded so much and taking so much risk, and I just thought I was risking the money I actually had.”
Alex’s parents have expressed frustration that their son cannot communicate with Robinhood faster.
“He’s completely panicked. He needed a little help. I think that’s all it would have taken to calm him down,” Dan said.
In addition to the wrongful death, the lawsuit filed by the Illinois family accuses Robinhood of negligently inflicting emotional distress and unfair business practices. The damages they seek will be determined at a later date.
Changes at Robinhood
Alex’s parents have expressed hope that their lawsuit will raise awareness about some of the risks of 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 this message. And he backed up those words with a very important suicide prevention gift,” Dan said, referring to Tenev. “I believe he’s remorseful about it and sorry for our situation.”
The company announced in June that it was donating $ 250,000 to the American Foundation for Suicide Prevention and urged those in difficulty to seek help.
Robinhood said this week that recent changes include new financial criteria and revised experience requirements for new clients looking to trade advanced options strategies and plans to expand that to other situations. Robinhood has also changed its system to escalate emailed support requests from certain options traders and provide live voice assistance to clients with open options positions.
The Kearns family have expressed support for the changes, but they said Tenev and Robinhood need to take more action, including additional phone support.
“I don’t think he’s made enough progress to protect immature novice investors like my son,” Dan said.
When asked to respond to those who would argue that Alex was ultimately responsible for the investment decisions he made, Dorothy said it wasn’t a question of her son playing too much. silver.
“It would be different if he made investment decisions and lost a lot of money based on those decisions and killed himself,” she said. “It would still be tragic, but we wouldn’t be here today … because it would have been his fault.”
Instead, Dorothy said she believes Robinhood has a responsibility for leaving her son confused and unanswered.
“If he had gotten a response from Robinhood, or if there was some kind of on-screen disclaimer,” she said, “that wouldn’t have been a problem.”
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