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Quad Capital Trader Was Customer in Apple Trade, FT Says

A trader at a New York hedge fund was the customer in an unauthorized $1 billion purchase of Apple Inc. (AAPL) stock that led to the failure of a Connecticut brokerage, the Financial Times reported.

Quad Capital trader Harlan Sender was suspended from the firm after a probe of his Oct. 25 order was begun, the newspaper said. The transaction led to the guilty plea of former Rochdale Securities LLC trader David Miller.

Miller earlier this month pleaded guilty to conspiracy and wire fraud in connection with the trade. He also entered into a partial civil settlement with the U.S. Securities and Exchange Commission, the agency said. Miller, scheduled to be sentenced on July 8, faces as long as 25 years in prison.

The government alleged that Miller placed an order for 1.6 million shares of Apple for a customer who wasn’t named in court filings. The customer claimed to have sought only 1,625 shares, according to the criminal complaint. Stamford, Connecticut-based Rochdale was left shouldering a loss on the shares when Apple’s stock didn’t perform as Miller had hoped, according to court papers.

“This defendant participated in a fraudulent scheme in which he would either reap huge profits through the unauthorized purchase of approximately $1 billion of Apple stock or, if he faced huge losses, explain it away as simple human error,” U.S. Attorney David B. Fein in Connecticut said at the time.

‘Every Question’

Sender cooperated with the government’s probe, Quad said in a statement. He has been asked to rejoin Quad, the FT said.

“Mr. Sender answered every question put to him by the government and our understanding is there are no more questions that will be asked of Mr. Sender,” Sender’s attorney, Sean Casey, said in a phone interview.

Quad said federal prosecutors have no further questions for the firm. Tom Carson, a spokesman for Fein, who announced his resignation today, said an investigation into the trade is continuing.

Rochdale suffered a $5.3 million loss as a result of the trade, causing the 37-year-old firm’s assets to fall below regulatory limits, according to the SEC. It eventually ceased operations, according to the agency.

To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at

cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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