Trader pleads guilty to fraud for unauthorized $1B Apple stock gambit
David Miller, who made headlines last year with an unauthorized purchase of $1 billion in Apple stock, plead guilty on Monday to wire fraud and conspiracy before a U.S. magistrate judge.
A former Rochdale Securities trader, the 40-year-old Miller entered a guilty plea in a Hartford, Connecticut court, reports Reuters. In addition to the criminal proceedings, Miller also faces a related civil fraud lawsuit, filed against him by the Securities and Exchange Commission on Monday.
On October 25, Miller bought 1.625 million Apple shares ahead of the company's earnings report, hoping to profit if the stock price went up. Asked by his superiors about the purchase, Miller said that the trade was for a customer that had ordered only 1,625 shares.
Apple's share prices dropped that day, though ? despite the company's profits being up 25 percent ? and Miller and Rochdale were left down $5.3 million. Due to the unsuccessful bet, the suddenly undercapitalized firm ceased operations shortly thereafter, with its staff leaving or being let go in November 2012. In February, the firm asked that the state of Connecticut, the SEC, and other regulators withdraw its registrations.
Prosecutors contend that Miller also defrauded another brokerage when he induced it to sell 500,000 Apple shares, some of it reportedly in hopes of hedging against the Rochdale purchase.
The Federal Bureau of Investigation picked up Miller on wire fraud charges in December. He now faces a maximum of 25 years in prison, but could get between five and eight years when he is sentenced on July 8 due to a plea bargain.
A former Rochdale Securities trader, the 40-year-old Miller entered a guilty plea in a Hartford, Connecticut court, reports Reuters. In addition to the criminal proceedings, Miller also faces a related civil fraud lawsuit, filed against him by the Securities and Exchange Commission on Monday.
On October 25, Miller bought 1.625 million Apple shares ahead of the company's earnings report, hoping to profit if the stock price went up. Asked by his superiors about the purchase, Miller said that the trade was for a customer that had ordered only 1,625 shares.
Apple's share prices dropped that day, though ? despite the company's profits being up 25 percent ? and Miller and Rochdale were left down $5.3 million. Due to the unsuccessful bet, the suddenly undercapitalized firm ceased operations shortly thereafter, with its staff leaving or being let go in November 2012. In February, the firm asked that the state of Connecticut, the SEC, and other regulators withdraw its registrations.
Prosecutors contend that Miller also defrauded another brokerage when he induced it to sell 500,000 Apple shares, some of it reportedly in hopes of hedging against the Rochdale purchase.
The Federal Bureau of Investigation picked up Miller on wire fraud charges in December. He now faces a maximum of 25 years in prison, but could get between five and eight years when he is sentenced on July 8 due to a plea bargain.
Comments
So he basically killed the whole company he was working for and cost all the employees their jobs? Nice work there buddy.
That is if anybody can find one of him.
Quote:
Originally Posted by TheUnfetteredMind
So he basically killed the whole company he was working for and cost all the employees their jobs? Nice work there buddy.
So much for a "sure thing."
I'd give anything to see a video of him after the time is made a "buy" and as he saw the free-fall in price... It's gotta been the classic jaw-drop of all times!
Quote:
Originally Posted by SolipsismX
I am pretty sure I'll be agreeing with Apple ][ on this one.
Is my presumed reaction that predictable?
Well, in that case, I suppose that there is little need for me to comment further on this particular piece of news.
Originally Posted by rob53
…anyone who had the power to stop it will simply turn their back on all of us…
They're doing that now. The only question in such a scenario is who would be able to avoid punishment (legally or… otherwise) the longest.
How many shares?
This guy bought the stock though, which wouldn't harm it and even selling it wouldn't be a problem - anybody with enough money could do that legally. The problem here was just that he did it without consent. The biggest harm was to the company he worked for, which is described on LinkedIn as having 51-200 employees who all lost their jobs as a result of the bad gamble because the company took the hit and not the customer:
http://www.valuewalk.com/2013/04/ex-rochdale-securities-trader-pleads-guilty-in-apple-inc-aapl-trade/
I don't think there's any more harm in public trading activity than there is in gambling but it should be legally recognised as gambling. It should be separated from mainstream banking and allowed to fail without taking down the rest of the economy.
I also wonder what the $1b purchase was made with. I take it the customer he bought the stock for was a billionaire. How could it have been that the customer didn't notice such a large transaction taking place or have some measures in place to verify and approve it? A false trade of that magnitude should have been noticed and corrected in a matter of minutes.
The stock market has created a level of dependency (on purpose) so that everyone has no choice but to join in and that needs to be undone. Our banking systems depend on it, creditors, insurance, everything. Without the accountability of failure, the gambling culture isn't going to decrease.
Quote:
Originally Posted by Marvin
This guy bought the stock though, which wouldn't harm it and even selling it wouldn't be a problem - anybody with enough money could do that legally. The problem here was just that he did it without consent. The biggest harm was to the company he worked for, which is described on LinkedIn as having 51-200 employees who all lost their jobs as a result of the bad gamble because the company took the hit and not the customer:
Did he really buy it with real money or did he buy it with the type of market money where he only had to pay a certain percentage of the total value? The stock market has all sorts of ways of trading stock without actually spending any money. If he actually found a way to transfer $1B to AAPL, I would have thought the market would have some kind of automatic threshold system monitoring purchases this large and would have checked it for accuracy before allowing it. Even if a billionaire had fronted this purchase, $1B is still a lot of money.
If you watch Trading Places, 1983 with Eddie Murphy, they were betting of futures and they didn't have to actually have all the money they were betting with. Insane activities like this is what allows this type of illegal activity and doesn't really punish the criminals as much as they should be.
You generally have 3 days to settle the transaction. So if the stock went up, he could have sold it and reaped the profits, without actually spending any money. Quite the gamble.
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Originally Posted by rob53
The problem is this is a common occurrence. The public just doesn't hear about all of them and some/many get away with it. We've all been complaining about the way the market tries to kill AAPL yet nobody is really doing anything about it. One of these days the market will really collapse because of jerks like this and anyone who had the power to stop it will simply turn their back on all of us who end up paying for it.
I agree with rob53... plus, the manipulation of stocks by short-term or day trading, as well as release of misleading company hype, causes average investors to panic in a herd mentality. And so far the government and market agencies allow the traders and speculators to do it.
Ending the practice of day trading would help enormously, as well as being a skeptical investor.