Former Rochdale Securities Trader Arrested

David B. Fein, United States Attorney for the District of Connecticut, and Kimberly K. Mertz, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, announced that David Miller, 40, of Rockville Centre, New York, was arrested today on a federal criminal complaint charging him with wire fraud. The complaint alleges that Miller engaged in a fraud scheme relating to large purchases of stock in Apple Inc. while he was employed as an institutional sales trader for Rochdale Securities LLC of Stamford.

“As alleged, this defendant orchestrated the unauthorized purchase of approximately $1 billion of Apple stock in a fraudulent get-rich-quick scheme that backfired, causing massive losses for his employer,” stated U.S. Attorney Fein. “I commend the FBI, with the substantial assistance of the SEC and FINRA, for its rapid response and for bringing this defendant to justice. The U.S. Attorney’s Office and our many partners on the Connecticut Securities, Commodities, and Investor Fraud Task Force are committed to protecting investors and the integrity of American capital markets. This investigation is ongoing.”

“As is so often seen in these types of cases, the alleged criminal conduct of Miller was for personal gain at the expense and detriment of others,” stated FBI Special Agent in Charge Mertz. “Manipulating and orchestrating stock transactions in such a manner is a very serious criminal offense and its impact can be both devastating and lasting. Today’s arrest underscores the FBI’s commitment to investigating this and all types of securities fraud in our nation’s stock markets.”

As alleged in the criminal complaint, Miller schemed to defraud Rochdale Securities LLC (Rochdale) by executing a trade to buy 1,625,000 shares of stock in Apple Inc. (Apple) on October 25, 2012, the day Apple was scheduled to announce its earnings for the quarter. The scheme was designed so that Miller would profit if the stock price rose after Apple announced its earnings later that day. In falsely representing to Rochdale that he was simply executing a customer order, Miller misrepresented that the customer was at risk of loss if the trade proved unprofitable, when he knew that it was Rochdale that would bear the risk of loss. When the stock price declined after the earnings announcement, Rochdale’s customer stated it had only ordered 1,625 shares of Apple. Miller falsely claimed that he had made a mistake in ordering many multiples of what was written in a client’s order.

As a result of this scheme, Rochdale was left holding more than 1.6 million shares of Apple stock. It promptly traded out of the position but suffered losses of approximately $5 million.

While he was executing the scheme at Rochdale, it is alleged that Miller defrauded another broker-dealer into taking on a significant short position in Apple stock. Through a series of misrepresentations made over the course of several weeks, Miller convinced the broker-dealer to sell 500,000 shares of Apple stock, falsely claiming that he was trading for the account of a company that, in reality, he had no relationship with and for which he was not authorized to trade. It is alleged that Miller engaged in this part of the scheme to hedge against the large purchase of Apple stock he was executing at Rochdale. As a result of the scheme, Miller placed the broker-dealer at risk of sustaining substantial losses.

Miller surrendered today to the FBI in Bridgeport. He appeared before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport and was released on a $300,000 bond.

The charge of wire fraud carries a maximum term of imprisonment of 20 years.

U.S. Attorney Fein stressed that a complaint is only a charge and is not evidence of guilt. Charges are only allegations, and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt.

This matter is being investigated by the Federal Bureau of Investigation.

U.S. Attorney Fein acknowledged the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) for their substantial assistance and cooperation during the investigation. The case is being prosecuted by Assistant United States Attorney Paul A. Murphy.

In December 2010, the U.S. Attorney’s Office and several law enforcement and regulatory partners announced the formation of the Connecticut Securities, Commodities, and Investor Fraud Task Force, which is investigating matters relating to insider trading, market manipulation, Ponzi schemes, investor fraud, financial statement fraud, violations of the Foreign Corrupt Practices Act, and embezzlement. The task force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service-Criminal Investigation; U.S. Secret Service; U.S. Postal Inspection Service; U.S. Department of Justice’s Criminal Division, Fraud Section, and Antitrust Division; U.S. Securities and Exchange Commission (SEC); U.S. Commodity Futures Trading Commission (CFTC); Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Office of the Chief State’s Attorney; State of Connecticut Department of Banking; Greenwich Police Department; and Stamford Police Department.

Citizens are encouraged to report any financial fraud schemes by calling, toll free, 855-236-9740 or by sending an e-mail to ctsecuritiesfraud@ic.fbi.gov.

Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants.

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.