The Washington PostDemocracy Dies in Darkness

A 20-year-old died by suicide, thinking he’d lost more than $730,000 on Robinhood. Now his family is suing.

Robinhood began drawing scrutiny in January after amateur investors on a Reddit subforum briefly sent the price of GameStop stock skyrocketing. (Gabby Jones/Bloomberg)

When 20-year-old Alex Kearns died by suicide last summer, his Robinhood online brokerage account appeared to show a negative balance of about $730,000. The company had emailed him demanding “immediate action” in the form of a deposit of more than $178,000 — money that the University of Nebraska sophomore didn’t have, according to a wrongful-death lawsuit filed Monday.

But Kearns didn’t actually owe any money at all, according to the lawsuit.

In a complaint lodged against Robinhood, Kearns’s family contends that the online trading app’s “misleading communications” contributed to his death. The 20-year-old was lured by the prospect of making big money from options trading, but panicked after concluding that he was in over his head, the lawsuit filed in Santa Clara County, Calif., argues. He left behind a suicide note that ended with, “The amount of guilt I feel as I commit to this is endless — I did not want to die.”

At the time of Kearns’s death, Robinhood wasn’t yet a household name. But late last month, the app began drawing scrutiny after amateur investors on Reddit briefly sent the price of GameStop stock skyrocketing, leaving some to reckon with massive losses once the rally came to an end.

“We were devastated by Alex Kearns’ death,” a Robinhood spokesperson said in a statement shared with The Washington Post, noting that the company has made numerous changes to its protocols since June. “We remain committed to making Robinhood a place to learn and invest responsibly.”

Kearns, of Naperville, Ill., began trading stocks on Robinhood while he was a teenager. His parents told CBS News that he had invested money he had earned from a summer job as a lifeguard, and occasional cash from birthday gifts. During his freshman year in college, he was approved to start trading options, a riskier and more sophisticated way to play the market.

One day in June, according to the lawsuit, Kearns executed an options trade that he thought carried a maximum loss of $10,000. Late that night, he received an email from Robinhood stating that his account had been restricted. Checking the app, he saw that he had a negative cash balance of $730,165.72.

But that jaw-dropping number may have simply indicated that only one side of the transaction had been processed, the lawsuit states. Thinking that he was looking at a staggering loss, Kearns repeatedly contacted Robinhood’s customer support team to ask what was going on. He didn’t get an answer, but instead received an email from the company at 3:26 a.m. telling him that his account didn’t meet the “cash requirements” for an earlier trade. To fix that, he would need to deposit $178,612.73 within days.

In fact, other options that Kearns held in his account would have “more than covered his obligation,” the complaint says. But that wasn’t clear from the automatically generated emails he received in response to his desperate queries. Several hours later, he ended his life.

“How was a 20-year-old with no income able to get assigned almost a million dollars worth of leverage?” Kearns wrote in his final note, explaining that he had never intended to take on so much risk. “F--- Robinhood. I was starting to look forward to my future, too, before I hit this pretty large speedbump.”

The next day, Kearns’s parents told CBS News, Robinhood sent their deceased son an email stating that all restrictions had been removed from his account. “Great news!” it read.

In a statement to The Post, Robinhood said that the changes the company has made since June include “updates to how we display buying power, more educational materials on options, and new financial criteria and revised experience requirements for new customers seeking to trade Level 3 options.” The brokerage app also now offers “live voice support” to customers with open or recently expired options positions, and will “escalate” emailed requests for help with options trades.

By eliminating trading fees and reducing barriers to entry with an easy-to-use interface, Robinhood promotes itself as democratizing financial markets. But critics worry that the app makes it too easy for users to make risky bets. Regulators in Massachusetts have filed a complaint against the company, alleging that it uses “aggressive tactics to attract new, often inexperienced, investors” and “gamification strategies to manipulate customers,” accusations that Robinhood denies.

The lawsuit filed on behalf of Kearns’s parents and sister, which seeks unspecified damages, argues that young and inexperienced investors “cannot possibly possess the sophistication needed to make sound trading decisions.” The 20-year-old’s confusion about his account balance was “entirely reasonable and foreseeable,” the complaint states, suggesting that the death could have been prevented if Kearns had received an immediate response to his queries.

“Alex believed that he was obligated to repay the deficit in his account and feared that his family would somehow get stuck with the obligation unless he did something drastic to protect them,” the lawsuit says.