Content Warning: Suicide
The family of a 20-year old customer of Robinhood has sued the stock trading and investing company for wrongful death after he took his life last summer after believing a Robinhood notice that he had racked up huge losses on the app.
The complaint states "'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 committed suicide by riding his bicycle into a railroad crossing and ran in front of an oncoming train."
"The case centers on Robinhood's aggressive tactics and strategy to lure inexperienced and unsophisticated investors. . . to take big risks with the lure of tantalizing profits."
Kearns, a then-sophomore at the University of Nebraska at Lincoln, committed suicide last June after believing he had a negative $730,165 cash balance on Robinhood. The complaint alleges that he misunderstood the financial statement on the app and was attempting to protect his family from the financial obligation. In actuality, Alex owed over $178k which was covered by his account balance within days of his suicide.
The complaint says that Kearns made three attempts to contact Robinhood customer service to discuss the massive negative balance, but his calls were met with automated replies. The complaint also states "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. . . . Worse, Robinhood provided almost no investment guidance, and its customer 'service' was virtually non-existent, consisting of automated email replies devoid of any human contact or interaction."
The Kearns complaint seeks damages for wrongful death, negligent infliction of emotional distress, and unfair business practices.
Robinhood is also facing class-action lawsuits from clients after the app's decision to restrict trading in certain securities during the recent GameStop stock surge. The company has announced plans to go public in 2021, and has also come under scrutiny for the access it gives its clients without proper investing education. In 2020, Massachusetts regulators filed a complaint against Robinhood, accusing the app of predatory marketing on inexperienced investors, and the Securities and Exchange Commission has recently charged the brokerage with misleading customers about how the stock-trading app makes money and failing to deliver the promised best execution of trades.
Editor's Note: It is unclear in the complaint whether or not Robinhood has a liability policy in place, but if the company does have liability coverage this lawsuit will likely trigger the insurers' duty to defend.
This case has been remanded back to the state court. Find the blip, and the complaint here on Law.com Radar, and follow the link below to sign up for Law.com Radar to receive similar updates first.
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