A stock trader from Rockville Centre has been sentenced to 30 months in prison for his scheme to profit from the purchase of over a million shares of stock in Apple, which drove his employer out of business.
David Miller, 41, was also sentenced by U.S. District Judge Robert N. Chatigny in Hartford to three years of supervised release after his release from prison, to spend the first six months of his supervised release in home confinement and to perform 200 hours of community service. He was also ordered to make full restitution to his former employer.
Miller was arrested on Dec. 4, 2012, and pleaded guilty to one count of conspiracy to commit wire fraud and securities fraud and one count of wire fraud on April 15, 2013.
According to an FBI press release citing court proceedings, Miller, while working as an institutional sales trader at Rochdale Securities LLC in Stamford, conspired with another person to buy 1,625,000 shares of stock in Apple Inc. 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 Oct. 25, 2012, the day Apple was scheduled to announce its earnings for the quarter, and would write the order in 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, the FBI said. If the trade proved unprofitable, Miller would claim human error, leaving Rochdale holding the losing position.
They followed through, and after Apple announced its earnings later that day, the stock price began dropping and it became clear that the trade would not be profitable, according to the FBI. When confronted, Miller falsely claimed that he had made a mistake.
Rochdale was left holding approximately 1,623,375 shares of Apple, which it promptly traded 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.
Meanwhile, 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.