Trading app Robinhood has been hit with a lawsuit by the parents of one of its users who committed suicide last June.
US college student Alex Kearns, 20, took his own life after the app displayed a loss to his account of around US$750,000, however it later came to light that the figure did not represent the actual losses but rather a temporary balance until the stocks underlying the options had settled in the account.
Kearns’ parents have filed a lawsuit in California, first obtained by CBS News, accusing Robinhood of wrongful death, negligent infliction of emotional distress and unfair business practices.
The filing also says that Robinhood targeted young and inexperienced customers and encouraged them to engage in risky trading practices without adequate customer support.
Robinhood said it has made several improvements to its app to prevent such events occurring in the future.
The incident has drawn attention to the safeguarding processes for trading apps such as Robinhood, which have allowed retail investors to trade stocks and options on the market with little to no experience or knowledge of what can sometimes be complicated financial products.
In December, the Massachusetts Secretary of the Commonwealth filed a complaint against Robinhood over a violation of the US state’s Securities Act, saying the company is “aggressively marketing itself to Massachusetts investors without regard for the best interests of its customers and failing to maintain the infrastructure and procedures necessary to meet the demand of its rapidly growing customer base”.
The app has also drawn the ire most recently from users for its decision to limit buying of shares in video game retailer GameStop Corp (NYSE:GME) during a Reddit-inspired trading frenzy in late January.