A rogue trader has been sentenced to 30 months in prison for his scheme to profit from an unauthorised purchase of a billion dollars of Apple stock.
The doomed plan – which eventually led to David Miller's employers being forced to put their biz up for a merger or fresh investment – was to buy millions of Apple shares on 25 October, 2012 – the same day the company planned to report its third quarter results. The expectation was that the fruity firm's share price would go up after the announcement.
According to prosecutors, Miller was working at Rochdale Securities LLP when he conspired with another unnamed individual to buy the stocks illegally on behalf of one of his customers. The co-conspirator agreed to write an order for 1,625 Apple shares in a way that Miller could later claim he misinterpreted.
Miller would then buy a thousand times the number of shares – that is, 1,625,000 – and if the trade was profitable, he and his accomplice would split the profits. However, if it turned out to be a bad bet, Miller would claim he'd made a mistake, leaving Rochdale with the losing position.
When Apple announced its earnings, the stock price started falling. Miller put his Plan B into action and claimed he'd mistakenly ordered too many shares, leaving Rochdale holding around 1.6 million Apple stocks. Trading out of that position caused the securities firm to suffer a loss of $5.3m – at which point regulatory requirements stopped it from continuing to buy and sell stocks, effectively killing the business.
While all this was going on at Rochdale, Miller had also convinced another unnamed broker to take on a short position in Apple stock – selling shares in the hope of buying them back at a lower price – to hedge against his scheme at Rochdale falling apart. He falsely claimed that he was trading for the account of a company that was not a customer of his and got the dealer to short 500,000 Apple shares. Although the unnamed broker was at risk of big losses, he/she was the lucky one since the bet paid off, leaving him/her with a profit.
Miller was arrested in December last year and pleaded guilty to one count of conspiracy and one count of wire fraud. As well as the two-and-a-half years in jail, followed by three years of supervised release, Miller has also been ordered to make full restitution to Rochdale. ®