Former trader sentenced to 30 months in prison for fraudulent $1B AAPL purchase
A Connecticut court on Tuesday sentenced former trader David Miller to 30 months in prison for enacting and conspiring on an unauthorized purchase worth $1 billion of Apple stock.
AAPL stock performance in October 2012. | Source: Yahoo!
U.S. District Court Judge Robert Chatigny's ruling puts an end to the seven-month long case, which saw Miller plead guilty to wire fraud and conspiracy, reports Reuters.
In December 2012, Miller was arrested by the U.S. Federal Bureau of Investigation for a fraudulent stock purchase and was subsequently charged with wire fraud. Prosecutors in the case said the trader conspired with one other person to buy 1.65 million shares of AAPL stock on Oct. 25, 2012, on the chance that prices would rapidly increase after a quarterly earnings announcement scheduled for that day. The second person remains unidentified.
According to reports, a client had informed Miller to make a buy of 1,625 AAPL shares, worth $1 million. Instead, the trader purchased 1.625 million shares worth $1 billion. Miller's former employer Rochdale Securities was reportedly put out of business due to the illegitimate buy.
Rochdale ended up facing $5.3 million in losses on top of the unauthorized share purchase, forcing the firm to shut its doors, according to documents from a parallel civil suit involving the Securities and Exchange Commission.
In addition, Miller is said to have persuaded another firm to sell 500,000 shares of Apple stock as a hedge against his billion-dollar bet. Court filings indicate the brokerage, which has also gone unnamed, was able to come out of the ordeal with a profit.
AAPL stock performance in October 2012. | Source: Yahoo!
U.S. District Court Judge Robert Chatigny's ruling puts an end to the seven-month long case, which saw Miller plead guilty to wire fraud and conspiracy, reports Reuters.
In December 2012, Miller was arrested by the U.S. Federal Bureau of Investigation for a fraudulent stock purchase and was subsequently charged with wire fraud. Prosecutors in the case said the trader conspired with one other person to buy 1.65 million shares of AAPL stock on Oct. 25, 2012, on the chance that prices would rapidly increase after a quarterly earnings announcement scheduled for that day. The second person remains unidentified.
According to reports, a client had informed Miller to make a buy of 1,625 AAPL shares, worth $1 million. Instead, the trader purchased 1.625 million shares worth $1 billion. Miller's former employer Rochdale Securities was reportedly put out of business due to the illegitimate buy.
Rochdale ended up facing $5.3 million in losses on top of the unauthorized share purchase, forcing the firm to shut its doors, according to documents from a parallel civil suit involving the Securities and Exchange Commission.
In addition, Miller is said to have persuaded another firm to sell 500,000 shares of Apple stock as a hedge against his billion-dollar bet. Court filings indicate the brokerage, which has also gone unnamed, was able to come out of the ordeal with a profit.
Comments
Good!
Now, let's see a few of those analysts behind bars too where some of them belong.
Manipulating stocks is illegal, even though the SEC doesn't really seem to give a crap about it in most cases.
I might be missing something here, but what's wrong with buying a lot of shares? Did he gamble using his parent company's money to do so? Would appreciate some more info from someone better versed in the stock market than I.
Unauthorized
He had permission to buy a million worth of stock using somebody else's money. Instead, he bought a billion worth of stock using somebody else's money withou permission.
Penalties for outright fraud at this scale need to be much more severe.
His company had to cover $999million and 99.9% of the losses which is one reason they don't exist anymore. Not chump change.
His company had to cover $999million and 99.9% of the losses which is one reason they don't exist anymore. Not chump change.
Don't you think there should be a system in place that prevents you from making that size of a purchase without jumping through some serious hoops? In the computing world we have "Are you sure you want to replace XYZ File?", so at an absolute bare minimum wouldn't you expect a trader to see a warning that looks something like "Are you sure you want to invest $1billion? (or did you totally f*ck up and mean to invest $1million?)".
This guy had to have had tremendous trust and authority to place an order of this kind. My accounts with broker houses don't have a million dollar credit, much less a billion. This guy gamed the internal system, fully banking on his ego; he had the authority to place a ONE BiLLION DOLLAR buy...... He bet, he lost, he's done. Brokers beware.
It's hilarious the SEC goes after a small fry for spending his wealthy bosses lunch money while we still wait for the banisters on Wall Street to be put in jail.
Let's be serious, stock manipulation happens all the time. Companies make gambles all the time. The company made a bad bet and did not want to pay go under, so they made up this stupid excuse and an escape-goat.
As an individual investor, I can't say that my wife made an un-authorized order and I would like to retract the order so I don't have to pay. Can't I?