Deceased Robinhood Investor Alex Kearns' Family Accuses Trading App of 'Reckless Conduct' in Lawsuit

Alex Kearns, a 20-year-old investor, died of suicide last year after he believed he went into nearly $1 million in debt.

The family of a deceased Robinhood investor filed a lawsuit against the trading app accusing it of luring inexperienced users with "tantalizing profits" and made them take big risks. Alex Kearns, the investor, died of suicide last year after he believed he went into nearly $1 million in debt.

The lawsuit, filed in California's Santa Clara County Superior Court on Monday, stated that Robinhood's "reckless conduct" resulting in the death of one of its investors. Kearns, 20, failed to understand the Robinhood financial statement and took his own life thinking he protected his family from the financial obligation.

"Not only did Robinhood permit Alex to open the account, but when Alex was a freshman in college later that year, it permitted him to trade options," the lawsuit stated. "Worse, Robinhood provided almost no investment guidance, and its customer 'service' was virtually non-existent, consisting of automated e-mail replies devoid of any human contact or interaction," the family alleged in the suit.

Kearns started trading on Robinhood when he was a senior in high school and last June, Robinhood notified him saying that he needed to deposit about $178,000 to help correct his negative balance of $730,000, according to the lawsuit. He was convinced that he went into debt after carrying out complex trades. The company did not tell him that he had options in his account covering his obligation. Moreover, it would have removed his negative balance by settling the puts, the complaint stated.


The family said that Kearns made three attempts to contact Robinhood customer service over his financial statement. However, he did not receive proper help and most of the responses were automated, according to the lawsuit.

"'How was a 20-year-old with no income able to get assigned almost $1 million worth of leverage?' These were the last known written words of 20-year-old Alex Kearns before he rode his bicycle to a railroad crossing and ran in front of an oncoming train," the lawsuit stated. "The only ones with the answer to Alex's question are defendants Robinhood Markets Inc., Robinhood Financial LLC and Robinhood Securities LLC."

The complaint continued: "The information available to Alex at that point indicated that he somehow lost $730,000 on a trade which he had understood to be limited to a maximum loss of less than $10,000."

Robinhood made headlines last month after it halted the purchases of GameStop shares after the Reddit-driven surge in the company's shares. The trading app justified its move by calling it a "risk-management decision." However, at least one class-action lawsuit was filed against Robinhood for "manipulating the open market."

This article was first published on February 9, 2021