The family of a novice stock trader who took his own life after mistakenly thinking he had lost more than £500,000 are suing Robinhood Financial over his death.
Alex Kearns, 20, died last June after misunderstanding a potential loss from a stock options trade.
The complaint, filed in Santa Clara County, California, seeks unspecified damages on behalf of his parents and sister.
It is alleging wrongful death, negligent infliction of emotional distress and unfair business practices.
Mr Kearns “died to protect his family from a thing that didn’t exist”, his cousin-in-law, Bill Brewster, told NBC, adding: “It is the most tragic story that you can think of.”
The family are claiming Robinhood employed “aggressive tactics and strategy to lure inexperienced and unsophisticated investors, including Alex, to take big risks with the lure of tantalising profits”.
The complaint also alleges that Robinhood provided little or no investment guidance to its users, and its customer service was limited to automated emails.
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Mr Kearns, who was a student at the University of Nebraska-Lincoln, received emails from Robinhood shortly after 11pm on 11 June, informing him that his account was restricted and that he was required to buy £500,000 in shares as a result of an options trade, the lawsuit says.
That left his account with a negative balance of £530,000, on a trade that he had understood would be limited to a maximum loss of less than £7,250, the lawsuit adds.
Desperate for information, Mr Kearns sent several emails to Robinhood’s customer support, but got only auto-generated replies back, the lawsuit says.
In the early hours of 12 June, Mr Kearns received an email from Robinhood saying he needed to deposit more than £130,000 within seven days to start to address the negative balance, the lawsuit says.
It describes Robinhood’s communications as “completely misleading because, in reality, Alex did not owe any money”.
It is claimed he held options in his account which more than covered his obligation.
Mr Kearns got into a “highly distressed mental condition”, the lawsuit says, which resulted in an “uncontrollable impulse to (kill himself) as the only option he could see”.
Robinhood, based in Menlo Park, California, said it was devastated by Mr Kearns’ death and has since made improvements to its options offerings.
These include adding more educational materials on options trading and new financial criteria, and experience requirements for new customers seeking to trade some options.
“In early December, we also added live voice support for customers with an open options position or recent expiration, and plan to expand to other use cases,” the company said.
:: Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email firstname.lastname@example.org in the UK. In the US, call the Samaritans branch in your area or 1 (800) 273-TALK.