David Miller, a former Rochdale Securities trader, admitted to an unauthorized purchase of about $1 billion in Apple stock. The unauthorized purchase resulted into the demise of Rochdale Securities. Miller pleaded guilty to wire fraud and conspiracy today. He entered the guilty plea in front of U.S. Magistrate Judge Donna Martinez in Hartford, Connecticut.
Miller will face a maximum of 25 years in prison and is going to be sentenced on July 8th. However he could receive a term of 5-8 years under a plea agreement. He is currently free on bond.
“What happened here was out of character for a kind and generous family man who has lived an otherwise law-abiding and good life,” stated Miller’s lawyer Kenneth Murphy as quoted by Reuters. “He deeply regrets what he has done and the harm it has caused to other people, including the former principals and employees at Rochdale.”
The U.S. Securities and Exchange Commission also filed a civil fraud lawsuit against Miller today.
Miller bought 1.625 million Apple shares on October 25, 2012. This was the day that Apple planned to report their third quarter results. He was hoping to profit from the company’s share price raise. Prosecutors said that Miller falsely told Rochdale that the trade was for a customer that had ordered just 1,625 shares. Since the plan backfired, Rochdale had to cover $5.3 million in losses for the extra 1,623,375 shares. Based in Stamford, Connecticut, Rochdale ended up having to shut down because they were undercapitalized after the incident.
Miller defrauded another brokerage by inducing them to sell 500,000 Apple shares as a way to hedge against the purchase he made at Rochdale. The court documents did not reveal who the second brokerage was. Because of Miller’s actions, Rochdale ceased operations. Rochdale’s staff left on their own or was fired in November 2012. On February 25, Rochdale asked the state of Connecticut, the SEC, and other regulators to withdraw their registrations.
Rochdale is not a defendant in either case and was not accused for any of the wrongdoing. The cases were filed under U.S. v. Miller, U.S. District Court, District of Connecticut, No. 12-mj-00288; and SEC v. Miller in the same court, No. 13-00522.