A former Rochdale Securities LLC trader pleaded guilty to federal conspiracy and wire fraud charges in connection with an unauthorized $1 billion purchase of Apple Inc. stock which led to his company’s failure.
David Miller, 40, gave his plea today before U.S. Magistrate Judge Donna F. Martinez in Hartford, Connecticut, prosecutors said in a statement. Miller also entered into a partial civil settlement with the U.S. Securities and Exchange Commission over the trade, according to the agency.
Miller, scheduled to be sentenced on July 8, faces as long as 25 years in prison, prosecutors said.
“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 in a statement.
The government alleged that Miller placed an order on Oct. 25 for 1.6 million shares of Apple that he said was for a customer who wasn’t named in court filings. The customer claimed to have sought only 1,625 shares, according to a criminal complaint. The Stamford, Connecticut-based brokerage was left shouldering a loss on the 1.6 million shares when Apple’s stock didn’t perform as Miller had hoped, according to the complaint.
The scheme “caused catastrophic losses for his former employer,” Fein said. 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. The website of the firm has since been taken down and calls to two phone numbers listed for it weren’t answered.
“Miller’s scheme was deliberate, brazen, and ultimately ill-conceived,” Daniel M. Hawke, chief of the SEC Enforcement Division’s Market Abuse Unit, said in a statement. “This is a wake-up call to the brokerage industry that the unchecked conduct of even a single individual in a position of trust can pose grave risks to a firm and potentially to the markets and investors.”
Miller conspired with another trader, not named in court documents, who was working on behalf of the customer, according to prosecutors. As part of the scheme, Miller misled a separate brokerage, also not named, and caused it to take a short position on 500,000 Apple shares, prosecutors alleged. The brokerage was able to trade out of the shares profitably, the government alleged.
Kenneth C. Murphy, a lawyer for Miller, said in a phone interview that his client “deeply regrets what he has done and the harm it has caused to other people.”
Miller surrendered to federal authorities in December. He was released on $300,000 bail.
The case is U.S. v. Miller, 3:12-mj-288, U.S. District Court, District of Connecticut (Bridgeport).