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The family of Robinhood trader Alex Kearns have revealed the tragic deals and missteps that led to his “avoidable death” by suicide.
Mr Kearns, 20, killed himself last year after wrongly believing he had run up debts of $730,000 on the investment platform.
The young investor took his own life after emailing Robinhood customer service to get clarification over his situation and only received an automated reply.
His mother and father have now sued Robinhood accusing the company of wrongful death, negligent infliction of emotional distress and unfair business practices.
In the lawsuit the family allege that the company targeted young and inexperienced customers, then pushed them to engage in risky trading practices.
Bill Brewster, a family member who invests professionally, revealed the impact that the death of Mr Kearns had on his family.
“The family are doing terribly. His parents lost their son, there is no worse tragedy, and by the way it was completely avoidable,” he said.
“I think the only thing worse than losing your son is realising that he did not do anything wrong and died over nothing. What is more tragic than that?
“And how do you ever move forward? And the only reason they have been public is that they do not want this to happen to any other family.”
Mr Kearns had been approved by the company to buy and sell option. Trades can leave temporary balances and debts over a number of days.
His Robinhood account showed a huge debt and the company had asked him to provide them with $120,000 in cash.
“I don’t know that I was shocked at Alex’s trading, in fact if he had talked to me about options, I would have told him to trade fewer contracts, but the trade that he had put on is I think actually a pretty responsible way to trade options,” said Mr Brewster.
“I say that in the context of the fact that most people should never ever touch options, they are financial dynamite potentially.
“Alex was a very intelligent kid and he studied hard. I did not think that selling a put spread was reckless behaviour.
“I think he was actually doing it within a defined risk, and he thought so, which is why when they showed him a negative $730,000 balance and requested $120,000 of cash he freaked out.”
When he saw the balance Mr Kearns emailed the company for clarification.
“I was incorrectly assigned more money than I should have, my bought puts should have covered the puts I sold. Could someone please look into this?” he wrote.
But he only got back an automated reply saying that Robinhood was “working get back to him.”
The day after his death Robinhood emailed him back with a full response.
“Great news! We’re reaching out to confirm that you’ve met your margin call and we’ve lifted your trade restrictions,” they wrote.
“If you have any questions about your margin call, please feel free to reach out. We’re happy to help!”
Mr Brewster says it was this lack of customer support that ultimately brought about the tragedy.
“I can have some sympathy for companies that maybe can’t respond to everything all the time, but the companies that I have sympathy for are not incentivising options trading,” he added.
“I think that if you are going to have the fastest growing trading platform on the planet, you better have the customer support in place to handle the growth and you can’t, it is an insufficient excuse, to say we did not foresee this growth, you have to.
“You can’t give people options approval and then say we did not anticipate this, they’re fundamentally inconsistent.”
Mr Brewster also said that the GameStop trading that recently took place with Robinhood, was another worrying example.
“When you think about last week and how many people must have felt they needed help especially when the trading got restricted, you have to have the customer service for that, you can’t not,” he said.
“The whole reason my family is public is so that this does not happen again. “
Following the death of Mr Kearns, Robinhood says it has tripled the size of its customer support team, hired hundreds more licensed brokers to provide customer support, and added an option for customers to request a call back from the company.
Robinhood had not responded to a request for comment at the time of publication.
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