• General
  • June 20, 2020
  • 4 minutes read

Robinhood To Enact Changes Following User Suicide

Robinhood co-CEO Vladimir Tenev. Photo by Noam Galai/Getty Images for TechCrunch, under Creative Commons license On the heels of the…

Robinhood co-CEO Vladimir Tenev.

Photo by Noam Galai/Getty Images for TechCrunch, under Creative Commons license

On the heels of the tragic suicide of Alex Kearns, a Robinhood user who took his own life after seeing — and misunderstanding — a negative $730,000 balance on his account statement as a result of options trading, Robinhood has announced new change commitments for its options offerings. The company highlighted three changes in particular; educational resources, eligibility, and its user interface. As regards educational resources, Robinhood says it’ll expand its educational content related to options trading as well as hire a dedicated “Options Education Specialist” for educational content. As regards eligibility, Robinhood says it’ll consider adding additional criteria and education before giving users authorization to trade options. As regards its user interface, Robinhood says it’ll be adding more details on its app to help users understand the mechanics of options trading.

Robinhood has also committed to making a $250,000 donation to the American Foundation for Suicide Prevention.

The tragic suicide of Alex Kearns was due to what can be termed an error of omission. A screenshot of his mobile phone seemingly showed a negative $730,165 cash balance displayed in red on the Robinhood app, but that didn’t actually represent uncollateralized indebtedness, rather his temporary balance until the stocks underlying his options got credited into his account. Kearns appears to have mistaken it for real debt and taken his life as a result. “How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?” a note found by Kearns’ parents on his computer read.

Kearns’s death seems to have invigorated concerns of trading apps like Robinhood offering trading services usually adopted by professionals to inexperienced users. Margin trading, options trading, and the likes are usually services adopted by professional traders while stock trading on its own is usually adopted by mainstream users. Robinhood is primarily a stock trading service but happens to offer additional services and options. The company’s app is mostly used by millennials and amateur traders rather than sophisticated investors. Such is the case that the coronavirus pandemic drove many more users for Robinhood. The company added 3 million accounts in this year alone and recently raised funding at a valuation of about $8 billion.

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