A 20-year-old trader, also a student of Nebraska University, committed suicide after his Robinhood account showed a massive negative balance, his family said. Alexander Kearns died by suicide last Friday.
According to Forbes, a note found on his computer by his parents on June 12 asked a question: "How was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?"
The boy took up stock investing during the COVID-19 pandemic, signing up with Millenial-focused brokerage firm Robinhood. It offers commission-free trading, a fun and easy-to-use mobile app. It also awards new customers free shares of stock.
A report in the Forbes said that Kearns had begun experimenting, trading options. His final note was filled with anger toward Robinhood. He wrote he had "no clue" what he was doing.
A screenshot accessed from Kerans' mobile phone revealed that his account had a negative $730,165 cash balance (over 5.5 crore) in red. Forbes report said it may not have represented uncollateralised indebtness at all, "but rather his temporary baalnce until the stocks underlying his assigned options actually settled into his account."
In his final note accessed by Forbes, Kearns said they he never authorised margin trading and was shocked his small small amount could rack up such an apparent loss.
"When he saw that $730,000 number as a negative, he thought that he had blown up his entire future," Kearns' cousin-in-law and a research analyst at Chicago-based Sullimar Capital Group said, adding that he was so conscious about savings when he was younger.
In the note Kearns left, he said that the puts be bought and sold "should have cancelled out".
Forbes said Kearns may not have realised that his negative cash balance displaying on his Robinhood account was only temporary and would be corrected once the underlying stock was credited to his account.
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