This tragic case caused horror around the world.
Business student Alex Kearns (20) from the US state of Illinois used the Robinhood stock app intensively. Then, last June, his account was suddenly deep in the red. 13 hours later, Alex was dead.
He had committed suicide because he thought he was heavily in debt. In truth, Alex didn’t owe anything!
Now the victim’s family has sued the US financial services company. Robinhood attracts young inexperienced investors with “aggressive tactics and strategies” so that they “take great risks for the attraction of tempting profits,” according to the lawsuit filed in Santa Clara, California.
Alex Kearns had opened a Robinhood account when he was still in school, where he traded and speculated in financial products and options. One day he found his account on the app in the red. There was a minus of over 730,000 dollars (around 600,000 euros)!
Although he did not owe the company that money, he was too inexperienced to understand the message, according to the lawsuit filed by his parents and sister.
The young man from Illinois then tried several times to contact Robinhood’s customer service, but only received automatic replies. He finally fell into “complete panic” because he thought he would have to pay the full amount back to Robinhood.
In a note Alex left his family, he accused Robinhood of allowing him to take too high a risk. In retrospect, he said he had “no idea” what he was doing.
“How could a 20-year-old with no income get a debt limit of nearly a million dollars?” He asks. “I didn’t want this huge leeway and I didn’t intend to take such a big risk.”
His family blames Robinhood for the young man’s death and accuses the company of unfair business practices.
Course of the Gamestop sharePhoto: BRENDAN MCDERMID / REUTERS
The plaintiffs complain that the financial services provider is marketing its platform “like a video game” and suggesting that stock trading and options are “fun ways” to make money and even get rich. They demand compensation, but the amount claimed remains unknown.
The news from Robinhood was misleading
Kearns received an email from Robinhood on June 11th stating that his account was on hold and that he should use it to buy $ 700,000 worth of shares. This left Kearns’ account with an extremely high negative balance!
Kearns then desperately sent several emails to Robinhood’s customer service department, but according to the lawsuit only received automatically generated responses. Eventually, he received an email stating that he had to settle the negative balance within seven days.
“Tragically, Robinhood’s news was completely misleading because Alex was actually not in debt,” says a spokesman for Robinhood now in court: because he held options in his account that would have canceled the massive negative balance.
An option is a contract that gives a buyer the right, but not the obligation, to buy or sell the underlying asset at a specified price.
► Robinhood said through a spokeswoman that the company was already “shaken” by the death of the young man. “Tragically,” the communication was misleading because Alex didn’t owe anyone any money. Robinhood subsequently revised its offer – especially with more information to the users.
Robinhood, based in Silicon Valley, is a trading platform specially designed for small investors, on which users can invest in financial products with little money. The broker was recently in the headlines in connection with the stock market turbulence around the computer game dealer Gamestop. There was criticism of Robinhood here because the company had restricted the purchase of shares in Gamestop and other companies after retail investors had previously triggered an extreme price increase.
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