This message ruined his life...

Summary

In the summer of 2020, 20-year-old Alex Kearns, a college student from Illinois, tragically took his own life after a massive financial error on the Robinhood trading platform. After dabbling in options trading, Alex was shocked to discover his account was showing a $730,000 negative balance. Desperate to resolve the issue and fearing the impact on his family, he received no meaningful help from Robinhood’s customer service. Only after his death did the company acknowledge the mistake. Alex's family has filed a wrongful death lawsuit, raising critical questions about the responsibility of trading apps to protect vulnerable users.

Takeaways

• 😀 Alex Kearns was a 20-year-old university student who became involved in stock trading through the Robinhood app during the COVID-19 pandemic in 2020.
• 😀 Robinhood app was marketed as an easy, low-cost trading platform, especially appealing to younger, less experienced traders.
• 😀 Alex was initially drawn to the app because it allowed him to trade without hefty fees, and he enjoyed making small profits.
• 😀 The app’s 'options trading' feature, which involves high-risk financial strategies, enticed Alex despite his lack of knowledge on the subject.
• 😀 Alex was quickly accepted into Robinhood’s options trading platform, even though he didn’t fully understand the risks involved.
• 😀 On June 11th, Alex’s Robinhood account displayed a negative balance of $730,000, as a result of a trade he had made in options trading.
• 😀 Alex immediately contacted Robinhood’s customer support, but he only received automated responses, escalating his panic and confusion.
• 😀 As Alex’s anxiety mounted, he received an email from Robinhood demanding an immediate payment of $170,000 as part of the debt repayment.
• 😀 In his state of fear and believing there was no way to pay the enormous debt, Alex took his own life, leaving behind a note explaining his actions.
• 😀 Alex’s family later discovered that the debt shown in his account was a mistake, and that he actually owed no money at all—Robinhood acknowledged the error after Alex’s death.
• 😀 Alex’s family filed a wrongful death lawsuit against Robinhood, arguing that proper customer service and support could have prevented the tragedy.

Q & A

What triggered Alex Kearns to start trading on Robinhood?

Alex started trading on Robinhood during the COVID-19 quarantine in 2020, seeking a way to pass the time after returning home. He was intrigued by the app’s simplicity and the low fees, which made it appealing to new traders.

Why did Alex's parents initially not worry about his trading?

Alex’s parents trusted him because he had always been responsible with money, saving most of it and rarely spending. They didn’t expect him to incur significant debt, especially since Robinhood's basic accounts had protections against going into large amounts of debt.

What is options trading and why is it riskier than regular stock trading?

Options trading allows traders to sell insurance policies (called options) to other stockholders. The trader who sells the option is on the hook to buy the stock if it loses value. This involves much higher risks, as there’s no limit to the debt one could incur, unlike regular stock trading where losses are limited to the amount invested.

How did Alex gain access to options trading despite lacking experience?

Alex was accepted onto Robinhood's options trading platform after applying, even though he had no prior experience or knowledge of options trading. The application process was not stringent, and the platform allowed users to access risky features without adequate safeguards.

What went wrong with Alex’s options trade on June 11th?

Alex's trade went wrong when the trader he had sold an option to exercised that option. This resulted in Alex being exposed to a massive debt of over $700,000 because the stock had tanked, and Alex was obligated to purchase the shares at a premium, a risk he did not fully understand.

What was Robinhood's response when Alex contacted them about the debt?

Robinhood’s customer support only sent automated responses, stating that they were busy and would be in touch. This left Alex feeling helpless as he tried to resolve what he believed was a mistake in his account.

How did Alex react when he received an email demanding payment for the debt?

Alex was terrified and ashamed. The email threatened legal action unless he paid a $170,000 portion of the debt. Feeling trapped, he believed the only way to protect his family from the financial burden was to take his own life.

What did Alex’s family discover after his death?

After Alex’s death, his family found a letter and a screenshot on his laptop showing the massive negative balance. In his note, Alex explained that he thought the debt was a mistake and that he didn’t know much about options trading. He believed he was protecting his family by ending his life.

What mistake did Robinhood make in Alex’s case?

Robinhood later admitted that the $730,000 debt was a mistake and that Alex did not actually owe that amount. However, the error came too late, as Alex had already taken his life before the company corrected the issue.

What legal action did Alex’s family take after his death?

Alex’s family filed a wrongful death lawsuit against Robinhood, claiming that had a real customer service representative been available to address Alex’s concerns, the tragic incident could have been avoided.