A former trader has pleaded guilty to wire fraud and conspiracy after his unauthorised purchase of US$1 billion in Apple stock caused the demise of his former employer.
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American David Miller was a trader at financial services company Rochdale Securities when he bought 1.625 million Apple shares on October 25, 2012. Apple that day planned to report third-quarter results and Miller hoped to profit if the company's share price rose.
According to prosecutors, Miller falsely told Rochdale that the trade was for a customer that had in fact ordered just 1625 shares.
When the bet backfired, Rochdale was on the hook for US$5.3 million of losses on the extra 1,623,375 shares, leaving the company undercapitalised, the SEC said in court papers.
Miller also defrauded another brokerage by inducing it to sell 500,000 Apple shares, hoping to partially hedge against the purchase he had made at Rochdale, prosecutors said. Court papers did not identify the second brokerage.
The SEC said as a result of Miller's bets, Rochdale ceased operations and its staff left or were fired in November 2012. On February 25, Rochdale asked regulators to withdraw its registrations.
Rochdale is not a defendant in either case and was not accused of wrongdoing. Daniel Crowley, who had been Rochdale's president, could not be reached for comment.
Miller faces a maximum 25 years in prison when he is sentenced on July 8, but under a plea agreement could receive a term of five to eight years.
"What happened here was out of character for a kind and generous family man who has lived an otherwise law-abiding and good life," Miller's lawyer Kenneth Murphy said.
"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 US Securities and Exchange Commission filed a related civil fraud lawsuit against Miller on Monday.