An Illinois family filed suit against financial services company Robinhood on Monday for the wrongful death of a 20-year-old trader.
Alex Kearns committed suicide last summer after believing he had compiled more than $730,000 in losses on Robinhood's stock-trading app, CNBC reported.
The Kearns family, based in Naperville, Illinois, filed suit in California state court in Santa Clara.
"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 parents Dan and Dorothy Kearns and sister Sydney Kearns.
Last month, Robinhood Markets Inc. was involved in controversy after it restricted the buying of GameStop shares and several other stocks that had soared after being shorted by professionals. The company also has been scrutinized for the access it gives clients without proper investing education.
The Kearns' lawsuit said Robinhood's "reckless conduct directly and proximately caused the death of one of its victims." It also accused the brokerage of negligent infliction of emotional distress and unfair business practices.
Alex Kearns, a then-sophomore at the University of Nebraska, committed suicide in June after believing he had a $730,165 deficit cash balance on Robinhood.
The suit said Kearns made three attempts to contact Robinhood customer service regarding the balance. Each try received an automated reply.
Kearns left his family a note, seen by CNBC. In it, he accused Robinhood of allowing him to compile too much risk, and said puts he bought and the shares sold "should have canceled out." (Puts are options that allow the owner the right to sell a security at a specified price.)
"How was a 20-year-old with no income able to get assigned almost a million dollars worth of leverage?" Alex Kearns wrote his family. "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."
A Robinhood spokesperson told CNBC, "We were devastated by Alex Kearns' death. Since June, we've made improvements to our options offering."
The company said it recently added live voice support for customers with an open options position or recent expiration, and also "changed our protocol to escalate customers who email us for help with exercise and early assignment."
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