United States (US) online stock broker, Robinhood has been sued by the Alex Kearns family. The company is blamed for the death of this 20-year-old man.
Launch CNBC, Tuesday (9/2/2021), Kearns is a Robinhood customer. His stress because of a loss of investment in shares through an application that is famous among millennial.
“This case centered on tactics and strategy of aggressive Robinhood targeting to lure investors who are newby, including Alex, to take great risks with the lure of profits lucrative,” the complaintby his parents Dan and Dorothy Kearns, and his sister Sydney Kearns in the California state court in Santa Clara.
Accusations on Robinhood That Make Investors Careless
They think the Robinhood strategy tends to be careless and directly and indirectly causes Alex’s death. The accusation is Robinhood’s negligence which caused emotional distress and unfair business practices.
Alex Kearns, a sophomore at the University of Nebraska at Lincoln, killed himself in June after estimating his balance of negative US $ 730,165 in Robinhood.
Kearns said that have misunderstood the financial system in the Robinhood application. He chose to take shortcuts rather than burden his family.
The lawsuit also stated that Kearns had made three attempts to contact Robinhood’s customer service regarding the matter. But he only gets automatic replies from the Robinhood system.
The Robinhood Features Unrecognized by Kearns
Kearns accuses Robinhood of letting Alex accumulate too many high-risk portfolios. In his lawsuit mentioned the use of share options should have canceled because it assumed that Alex did not understand this.
Stock options are a feature for investors to bet on whether the stock will go up or down. In stock options there is a put bet that the stock will fall and a call bet that the stock will go up. However, this feature has a big risk for those who don’t understand it.
“How can a 20 year old without income get nearly a million dollars worth of leverage?” wrote the lawsuit.
“We are devastated by the death of Alex Kearns. Since June, we have made improvements to our option offering,” a Robinhood spokesman told CNBC.
Robinhood has also faced class action lawsuits from clients following its application decision to restrict trading in certain securities during the recent GameStop controversy. The brokerage firm, which plans to go public in 2021, has repeatedly said that the majority of its users are long-term investors.
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