Where's the Sheriff of Nottingham when we need him?

I have paid precious little attention - make that little of my precious attention - to the recent GameStop, subreddit, short seller, hedge fund, Robinhood hooha. I know just what one can expect to absorb through information osmosis. Which is to say that I know that some largely amateur traders put a short squeeze hurtin' on some hedge funds by revving up the share price of GameStop, a clunky old brick-and-mortar retail outfit. The hedgies that had shorted GameStop had to scramble to cover their bets, in the process revving the price of GameStop up even further. And so on. 

Many of the amateur traders that played around with GameStop do their trading via Robinhood, a trading platform/app widely used by Millennials and the older "kids" in their trailing cohort, Gen Z. (The average age of a Robinhood-er is mid-twenties.)

They get hooked on Robinhood because it's simple, easy to use, and it's just like a game. Except instead of scoring points (or whatever you get when you play online games), you can make money. Or lose money.

This past December, Massachusetts Secretary of State Bill Galvin went after Robinhood.

...accusing the trading app of predatory marketing on inexperienced investors.

The complaint cites Robinhood’s “aggressive tactics to attract inexperienced investors, its use of gamification strategies to manipulate customers, and its failure to prevent frequent outages and disruptions on its trading platform.” (Source: CNBC) 

At the heart of the complaint is that Robinhood is "gamifying the idea of investing."

 “This is a very reckless company when it comes to these investors. They’re interested in expanding their market base, they’re not interested in serving their investors,” said Galvin.

...Galvin said inexperienced investors need protection.

“What we really want to make sure is that these people are treated fairly. We do not believe they are. They are basically having the experience of trading, but it’s a reckless experience because of the way that Robinhood has treated them,” he said.

“It’s marketing itself to them as a device by which they can become wealthy without having the expertise or the skill,” Galvin added.

“They’re taking unsophisticated investors, most of whom have no experience, and basically making this into a game, causing them to suffer losses. They’re bringing them aboard on something that these people have absolutely no idea about,” he said. 

Robinhood, of course, rejects this. Caveat Millennial-sitting-at-home-in-your-childhood-bedroom-because-your-college-is-shut-down and all that. 

One of those kids trading away from his childhood bedroom wasn't even a Millennial. Alex Kearns, a college kid stuck at home, was just 20 when he killed himself last June after being informed by Robinhood that he was running a negative balance of $730K and would need to pay down $178K of that balance ASAP. He had been playing around for a couple of years with birthday gift money from his grandparents, and with his earnings as a lifeguard. But then he found himself in over his head. Or a least thinking he was in over his head.

Anyway, when Kearns tried to contact Robinhood support, he got back a chirpy email telling him to pay up.

He panicked. And killed himself. 

“How was a 20-year-old with no income able to get assigned almost a million dollars worth of leverage?” Kearns wrote in his final note, explaining that he had never intended to take on so much risk. “F--- Robinhood. I was starting to look forward to my future, too, before I hit this pretty large speedbump.” (Source: WaPo)

The next day, Kearns got another email missive from Robinhood. "Great news!", it read. He didn't owe the money. 

Too little, too late.

And now, his parents have filed a wrongful death suit. 

I can not begin to imagine the heartbreak Alex Kearns' parents are going through.

They look like a nice family. He looked like a nice kid.

Naperville, Illinois.

I have relatives there.

My cousin Ellen raised her family in Naperville, and her two children stayed there to raiser their families as well. Ellen's oldest grandchild is a couple of years younger than Alex Kearns. Did Ellen's granddaughter know him? Did she know his sister, who in the picture I saw looks to be younger than her brother? Alex was a lifeguard. Swimming is a big deal in Naperville. I think Ellen's granddaughter was a lifeguard, too. (I know her mother had been.)

Alex Kearns looked like a nice kid. He looked like the type of kid from the type of family that Ellen and her kids and their kids would have known.

What was going through this poor boy's mind when he got that dunning notice from Robinhood?

I've screwed up my life? There goes my college education? There goes my sister's college fund? There goes my parents' retirement? 

And he was a smart kid, too, asking the right question: “How was a 20-year-old with no income able to get assigned almost a million dollars worth of leverage?”

Since Kearns' death, Robinhood has revised some of its procedures. Too little for Alex Kearns and his family. Too late.

The lawsuit filed on behalf of Kearns’s parents and sister, which seeks unspecified damages, argues that young and inexperienced investors “cannot possibly possess the sophistication needed to make sound trading decisions.” The 20-year-old’s confusion about his account balance was “entirely reasonable and foreseeable,” the complaint states, suggesting that the death could have been prevented if Kearns had received an immediate response to his queries.

I hope that Robinhood gets clobbered. 

It is beyond reckless to let anyone - let alone a 20 year-old kid - play around with margin money if they can't back it up. 

Sure, Alex Kearns was a "big boy." But he was still a boy. 

It's about time that outfits like Robinhood come under some more scrutiny, about time there are some regulations imposed on the wanton recklessness with which they treat their marks customers. 

Alex Kearns' parents can't get back their son, but maybe they can save some other parents the same grief.

Going by the name Robinhood, by the way, is just plain cynical. Robin Hood robbed from the rich to give to the poor. In the theme song from the "Robin Hood" series of my childhood, Robin Hood was feared by the bad, loved by the good. Not in this case.

The Robin Hood of my childhood was always being chased by the Sheriff of Nottingham, who was the bad guy. With respect to the latter day Robinhood, all I can say is "Where's the Sheriff of Nottingham when you need him?"