It was belatedly known that a 20-year-old college student in the United States who had just started investing in stocks misunderstood the size of their losses and made an extreme choice. The bereaved family went into a lawsuit for damages against Robin Hood, a popular stock trading app.
According to the Wall Street Journal (WSJ) on the 8th (local time), Alix Kern, a 20-year-old student at Nebraska Lincoln University, killed himself in June last year.
Kerns first opened a stock account through Robin Hood in 2019, when he was a senior in high school. Since last year, it has started trading on derivatives, put options (the right to sell holdings at a specific time and price). On June 11, last year, Kerns was surprised to open the Robin Hood app. This is because the number of’-73 million dollars (about 815 million won)’ was stamped on the cash balance of his stock account.
In fact, this number didn’t mean the size of Kern’s debt. This was only a loss that was temporarily recorded only on the books due to the time difference that occurred in the process of trading derivatives. If you exercised the put option held by Kern, this problem could be solved as much as possible.
However, Kerns was never informed of this from Robin Hood. Rather, at the time, Conce’s e-mail message was a margin call (request for additional margin) warning to deposit $178,000 (approximately 200 million won) within the deadline, saying that there was insufficient margin to maintain the option transaction. Cons emailed Robin Hood’s customer support team three times overnight to figure out the situation, but only received an automatic response saying’corrective action is in progress’.
Conce, who thought that his mistake had resulted in an astronomical debt, died the next day. In a memo he left before his death, he said, “How can a 20-year-old without income do a leveraged transaction worth 1 million dollars?” I did.”
The bereaved family said, “If Robin Hood had only provided an immediate telephone consultation service, Kern wouldn’t have made that choice.” Recently, Robin Hood filed a lawsuit for damages in a California court claiming that he misunderstood the loss due to a misleading communication.
Robin Hood expressed condolences for Kern’s death. Measures were taken to strengthen explanations for derivatives transactions that are difficult to understand unless you are a professional investor such as margin call.
Reporter Oh Hyeong-joo [email protected]
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