The Securities and Exchange Commission, which Underwood mentioned in the letter as a a regulator that should be urged to take action here, declined to comment.
“This spotlights some real gaps in our systems and oversight,” she said. Lawmakers are “exploring avenues to compel” regulators to increase oversight on Robinhood and similar platforms, Underwood said in an interview. The tragedy could prompt increased scrutiny from regulators. That customer service typically takes place via email.
It’s real life.”Ī Robinhood spokesperson said the company has doubled the number of customer support agents it has and plans to add hundreds of registered financial services professionals by the end of the year. “Robinhood has designed a platform that feels very much like a video game…It’s not a game. “I see that as a recipe for disaster,” Underwood told CNN Business. Underwood accused Robinhood of incentivizing risky trading to new investors while providing limited customer support.
The Kearns family believes Alexander was misled by the app’s interface suggesting he owed $730,000, when that was not really the case. Kearns, a college student with no income, was using Robinhood to trade complex options instruments. The tragedy drew widespread attention to the potential risks of the free-trading boom ushered in by Robinhood, which caters to young, first-time investors. The company also announced plans at the time to make a $250,000 donation to the American Foundation for Suicide Prevention and urged people who are in crisis to reach out for help. “We are personally devastated by this tragedy,” Vlad Tenev and Baiju Bhatt, Robinhood’s co-CEOs, wrote in a blog post. Last month, Robinhood announced plans to improve its user interface in response to Kearns’s death. “We take our responsibility to our customers seriously and will work with the Representatives and Senators to address their questions and concerns,” a spokesperson said in a statement. In response to the letter, Robinhood said it would work with the lawmakers. The letter was also signed by Illinois Senators Dick Durbin and Tammy Duckworth. Underwood, a Democrat who represents the Illinois district where Kearns’s parents live, wrote a letter to Robinhood that expressed “serious concerns” about a “lack of safeguards” at the $8.6 billion trading platform. Robinhood said last Thursday it removed temporary trading restrictions on all stocks, including GameStop Corp and AMC Entertainment Holdings Inc., according to Reuters.Apparent suicide by 20-year-old Robinhood trader who saw a negative $730,000 balance prompts app to make changes Robinhood was recently thrust into the limelight when the company made the decision to restrict trading in several highly volatile stocks after members of the Reddit group WallStreetBets banded together to squeeze short-sellers.
"Tragically, Robinhood’s communications were completely misleading, because, in reality, Alex did not owe any money he held options in his account that more than covered his obligation, and the massive negative balance would have been erased by the exercise and settlement of the" options Kearns held, according to the lawsuit.Īfter not being able to speak to anyone from Robinhood, the lawsuit alleged that he became fearful over the financial obligation, which "resulted in a highly distressed mental condition in Alex, an uncontrollable impulse to commit suicide as the only option he could see." The response came after he sent multiple emails to Robinhood's customer support, but only received auto-generated replies, the lawsuit alleged. the following morning saying he needed to deposit more than $178,000 within seven days to begin to address his negative balance, the lawsuit added. Kearns received emails from Robinhood informing him that his account was restricted on June 11 and that he was required to buy $700,000 in shares as a result of an options trade, which left his account with a negative balance of $730,000, according to the lawsuit.ĭespite being under the understanding he would be limited to a maximum loss of less than $10,000, Kearns then got an email from Robinhood around 3:30 a.m. Kearns' family claimed the popular stock-trading platform’s business practices "directly" led to their son’s death, with his mother and father alleging that Robinhood targeted young and inexperienced customers.
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