Rookie investor took his own life after Robinhood app showed staggering losses: lawsuit

A grieving family is suing the stock trading app Robinhood after their college-age son took his own life in despair over staggering losses that turned out to be no big deal.

Alex Kearns started trading stocks on the app before graduating high school with about $5,000 he'd saved up from gifts and a summer lifeguarding job, but his parents said their son went into a panic in June when Robinhood restricted his account over what appeared to be $730,000 in losses, reported CBS News.

"He thought he blew up his life," said his father, Dan Kearns. "He thought he screwed up beyond repair."

Robinhood had approved the rookie investor to buy and sell options -- a risky financial instrument that can result in major losses -- and notified the 20-year-old by email June 11 that his balance was nearly three-quarters of a million dollars short, and the company sent an automated message hours later demanding "immediate action" and more than $170,000 within days.

Alex Kearns mailed the company's support desk three times late that night and the following morning, asking for an explanation and assistance in offsetting the losses, but he only received an automated message in response and was unable to find a customer service phone number.

"How was a 20-year-old with no income able to get assigned almost $1 million worth of leverage?" Alex wrote in a June 12 letter to his parents. "The puts I bought/sold should have cancelled out, too, but I also have no clue what I was doing now in hindsight. There was no intention to be assigned this much and take this much risk, and I only thought that I was risking the money that I actually owned. If you check the app, the margin investing option isn't even 'turned on' for me. A painful lesson. F*** Robinhood."

The sheriff knocked on the family's door later that day to deliver the news that Alex had committed suicide, and his parents are haunted by the automated email Robinhood sent the following day notifying their son the trade issue was resolved and his account was clear.

"Great news!" the email read. "We're reaching out to confirm that you've met your margin call and we've lifted your trade restrictions. If you have any questions about your margin call, please feel free to reach out. We're happy to help!"

Robinhood has put new protections in place to restrict inexperienced investors from making riskier bets, but still allows customers with "not much" market experience to trade options.

"How are those guardrails?" Dan Kearns said. "How does that stop an 18-year-old from making risky trades that they don't really understand?"

The company also offers more guidance on trading and allows customers to request callbacks from live agents, and made changes to the email help system to escalate situations like Alex faced.

"The information they gave him was just incredibly skewed, and possibly completely wrong, because they make it look like you owe $730,000 when you really don't owe anything" said family attorney Benjamin Blakeman, who is helping to file a lawsuit alleging wrongful death, negligent infliction of emotional distress and unfair business practices. "That could panic just about anybody."