Recorded Voice: The following segment is sponsored by Martin, Harding & Mazzotti.
Dorothy: I lost the love of my life. I miss him more than anything. It’s the kind of pain that I don’t think should be humanly possible.
Anchor: And you just heard from Dorothy Kearns, mother of Alex Kearns, the college student who took his own life after believing he had incurred substantial losses on the trading app, Robinhood. Kearns’s parents are now blaming the company for his death. And here to help break down this lawsuit and discuss your rights when investing on these platforms is Managing Partner Paul Harding from the law firm of Martin, Harding & Mazzotti.
Paul: The case against Robinhood is real. So we’ve got this 20-year-old guy who’s got a net worth of just a few thousand dollars. He’s able to open an account and he’s open to what he perceived to be losses of $700,000. It wasn’t exactly what his loss is worth but he wasn’t able, through the platform, to identify that that wasn’t the case. So as a young guy he thought, “Boy, I’ve ruined my future, maybe my family’s,” and he took his own life. So that’s the genesis of the lawsuit and it’s at the very beginning of it. It’ll be an interesting one to watch.
Anchor: If Mr. Kearns only had a few thousand dollars to invest, how is it that he incurred so much debt and shouldn’t be a system that prevents this?
Paul: You do and you don’t. So you have a situation here which is super unusual and it’s the best it can be, really sophisticated, a thing called options, right? We’re just getting into what those are. Well, let’s assume that this is something where you can incur a tremendous amount of debt and you can make a tremendous amount of money but the level of sophistication is far beyond just buying a stock.
So, here is what he did. You just check a couple of questions. Normally, you’d have to go through and you have to show that I’m investor, I’ve been doing this for years, I know what I’m doing. A couple of softball questions, he checked yes to them, and he’s in the world of options. So that’s the issue. Can someone just jump into the world of option investing or not? And the lawsuit is going to really help explain this.
Anchor: Is any recourse for investors who wanted to buy stock or for those who lost money at the hands of retail investors following this leadership of Reddit users through platforms like this?
Paul: The whole country started paying attention to what a short sale is, what Robinhood is, what Reddit is. But what happened here is, you know, there’s a class-action suit filed against Robinhood. And really, what they’ve done is they’ve, kind of, created an atmosphere that allowed people to get in basically, invest in their platform and then they turned it off. It was a situation where the New York stock market, sometimes they’ll halt trading, right, but this platform halted trading so the people were stuck. They couldn’t buy. They couldn’t sell. They couldn’t make a move. And so when this happens, we’re going to have losses and those losses are the basis of yet this other lawsuit which is called class-action lawsuit against Robinhood.
Anchor: And you can find more on this developing story on our website, cbs6albany.com.