The FBI reports that a trader who last year made an unauthorized purchase of nearly US$1 billion worth of Apple stock has pled guilty to wire fraud, securities fraud and conspiracy.
On October 25, 2012 -- the same day Apple posted its Q3 2012 earnings -- David Miller of Rochdale Securities made a number of unauthorized purchases of Apple shares which ultimately led to the demise of the financial services firm he worked for.
The aim of Miller's action was to make a lot of money very quickly by purchasing large quantities of Apple shares and selling them in a post-earnings surge.
So starting at around 9:30 AM on October 25, a co-conspirator of Miller's put in an order for 125,000 shares of Apple stock. Throughout the course of the day, Miller continued to snatch up shares of Apple in quantities of 125,000. By the end of the trading day, Miller had acquired approximately 1,623,375 shares of Apple. Apple at the time was trading in the low $600 range and Miller's unauthorized shares were worth close to $1 billion.
Later that day, Apple posted solid earnings, but as is typically the case after an earnings report, shares of Apple went down over the next few days.
When the higher ups at Rochdale Securities confronted Miller about his large stock purchase, he claimed he had accidentally entered in a legitimate customer order for 125,000 shares of Apple multiple times.
Rochdale Securities was subsequently forced to sell its position in Apple and endured a loss of nearly $5.3 million. Unfortunately, the firm, based in Hartford, Conn., was unable to recover from the loss. Just one month later, Rochdale Securities let go of its staff and ceased to function as an operating entity.
It's worth noting that Miller's unauthorized purchase of Apple shares wasn't the only crime he engaged in.
The FBI adds:
While he was executing the scheme at Rochdale, Miller also defrauded another broker-dealer into taking on a significant short position in Apple stock. Through a series of misrepresentations made over the course of several weeks, Miller convinced the broker-dealer to sell 500,000 shares of Apple stock, falsely claiming that he was trading for the account of a company, which he had no relationship with and for which he was not authorized to trade. Miller engaged in this part of the scheme to hedge against the large purchase of Apple stock he was executing at Rochdale.
Miller will be sentenced on July 8, 2013. The renegade stock trader faces up to 25 years in prison but may only serve five to eight years under terms of a plea agreement. In the meantime, he is free on $300,000 bond.