Rochdale Securities Trader Sentenced to 30 Months in Prison in Scheme Involving Apple Stock Purchase
|U.S. Attorney’s Office November 19, 2013|
Deirdre M. Daly, Acting United States Attorney for the District of Connecticut, and Patricia M. Ferrick, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, announced that David Miller, 41, of Rockville Centre, New York, was sentenced today by U.S. District Judge Robert N. Chatigny in Hartford to 30 months of imprisonment, followed by three years of supervised release, for his role in a fraudulent scheme to make large purchases of stock in Apple Inc. while employed as an institutional sales trader for Rochdale Securities LLC of Stamford. Judge Chatigny also ordered Miller to spend the first six months of his supervised release in home confinement and to perform 200 hours of community service.
According to court documents and statements made in court, Miller, while working as an institutional sales trader at Rochdale Securities LLC (Rochdale) in Stamford, conspired with another individual to execute a trade to buy 1,625,000 shares of stock in Apple Inc. (Apple) on behalf of a Rochdale customer whose account Miller handled. As part of the scheme, Miller and his co-conspirator had agreed that the co-conspirator would submit an order for Apple stock on October 25, 2012, the day Apple was scheduled to announce its earnings for the quarter, and would write the order in such a way that Miller could later claim he misinterpreted it. Miller would then execute a trade for 1,000 times the number of shares written in the order. If the trade proved profitable, Miller and his co-conspirator would share in the profits. If the trade proved unprofitable, Miller would claim human error, leaving Rochdale holding the losing position.
At approximately 9:31 a.m. on October 25, 2012, Miller’s co-conspirator submitted an order for Apple that read: “b 125 ok (per 1/2 hr).” Miller then began executing orders to buy 125,000 shares of Apple stock, purportedly on behalf of the Rochdale customer. Over the course of the day, Miller entered multiple, separate orders in Rochdale’s order management system in the amount of 125,000 shares. After Apple announced its earnings later that day, the stock price began dropping and it became clear that the trade would not be profitable. When confronted, 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 approximately 1,623,375 shares of Apple. It promptly traded out of the position, but suffered a loss $5,292,202.50. Regulatory requirements subsequently prohibited Rochdale from continuing to trade securities, which led directly to its cessation of all business operations.
While he was executing the scheme at Rochdale, Miller also 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, which he had no relationship with and for which he was not authorized to trade. 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. In the end, the broker was able to trade out of the position at a profit.
Miller was arrested on December 4, 2012. On April 15, 2013, he pleaded guilty to one count of conspiracy to commit wire fraud and securities fraud, and one count of wire fraud.
Judge Chatigny ordered Miller to make full restitution to Rochdale.
This matter was investigated by the Federal Bureau of Investigation. Acting U.S. Attorney Daly 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 was prosecuted by Assistant U.S. Attorney Paul A. Murphy.