Robinhood was sued Monday for wrongful death by the family of Alex Kearns, a 20-year-old customer who took his life last summer after believing he had racked up big losses on the millennial-favored stock trading app.
“This case centers on Robinhood’s aggressive tactics and strategy to lure inexperienced and unsophisticated investors, including Alex, to take big risks with the lure of tantalizing profits,” said the complaint filed by his parents Dan and Dorothy Kearns, and his sister Sydney Kearns in a California state court in Santa Clara. The family is based in Naperville, Illinois.
Robinhood’s “reckless conduct directly and proximately caused the death of one of its victims,” the complaint said. The lawsuit is also accusing the brokerage of negligent infliction of emotional distress and unfair business practices.
Alex Kearns, a then-sophomore at the University of Nebraska at Lincoln, committed suicide in June after thinking he had a negative $730,165 cash balance on Robinhood.
The complaint alleges that Kearns misunderstood the Robinhood financial statement and was protecting his family from the financial obligation.
The suit says that Kearns made three attempts to contact Robinhood customer service regarding the massive underwater balance.
However, his messages were met with automated replies, according to the complaint.
In a note to his family that CNBC has seen, Kearns accused Robinhood of allowing him to pile on too much risk. He claimed the puts he bought and the shares sold “should have cancelled out,” according to the note.
Puts are options that give the owner the right to sell a security at a specified price.
The trader said he had “no clue” what he was doing, according to the note.
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SOURCE: CNBC, Maggie Fitzgerald