By Tom Hals

Feb 8 (Reuters) - The family of a 20-year-old stock traderwho committed suicide sued the broker Robinhood for his death,citing its "misleading communications" that caused their son topanic over what he wrongly believed were huge market losses,according to a lawsuit.

Robinhood notified Alex Kearns in June of what he thoughtwas a $730,000 loss on a trade, and when he was unable tocommunicate with anyone at the company, the college student wasthrown into a highly distressed mental state, the lawsuitstated.

As a result, fearing he had obligated his family to repaythe huge loss, he ran in front of a train and killed himself,according to the lawsuit, filed in California state court.

"We were devastated by Alex Kearns’ death," said a statementfrom Robinhood, which added that it was improving itseducational materials and more live support staff, among otherchanges.

Monday's lawsuit said Robinhood has an obligation to knowits customers and ensure their trading strategies areappropriate, but instead the broker preyed on inexperiencedinvestors.

Kearns apparently believed an options trade placed throughRobinhood had led to a $730,000 loss, far beyond the possibleloss of around $10,000 that he had expected, according to thelawsuit. In reality, the loss was covered by other options inKearns' account, according to the lawsuit.

The lawsuit comes amid growing scrutiny of Robinhood'scommission-free trading and seeks unspecified damages.

The app helped fuel a wild rally in shares of video gameretailer GameStop Corp and other companies out of favorwith Wall Street hedge funds in what has been touted as arevolution in retail trading.

However, Robinhood restricted trading in the most volatilestocks on Jan. 28, a move it said was done to meet capitalrequirements, sparking outcry among users and demands for itsexecutives to testify before Congress.(Reporting by Tom Hals in Wilmington, Delaware; Editing by DanGrebler)