David Miller, the former securities trader that drove Rochdale Securities out of business with a US$1 billion Apple stock scam, will spend two and a half years in jail for wire fraud and conspiracy. Mr. Miller's ill-fated scheme banked on Apple's stock rising after a quarterly earnings report when instead it dropped, leaving the securities firm he worked for with the bill for the transaction.
Mr. Miller found himself on the wrong side of the law when Federal agents arrested him in 2012 after his scheme fell apart. He claimed accidentally purchased 1.625 million shares of Apple stock when a Rochdale Securities customer had actually requested 1,625 shares, and then told his coworkers the client was covering a short position.
He also conned a broker-dealer into taking a short position on 500,000 shares of Apple's stock by posing as a trader for a firm he wasn't actually involved with.
Had Apple's stocked climbed after the quarterly earnings report that happened just after the purchase, Mr. Miller would've walked away with a substantial bank roll. When the stock dropped, however, the securities firm was stuck holding the $1 billion bill and was hit with a $5 million loss.
Rochdale Securities wasn't prepared to face a $5 million loss -- especially since the firm hadn't approved the transaction -- and ultimately went out of business.
Mr. Miller entered a guilty plea in his case earlier this year and has been awaiting sentencing. He was facing up to 25 years in prison, which makes the 2 1/2 years he will be behind bars seem lenient.
His attorney, Kenneth Murphy, said at the sentencing,
As we said on the day of his plea, this was a good and decent man who had led an otherwise exemplary life who acted out of desperation rather than greed. Judge Chatigny saw this to be the case and gave David a fair and reasonable sentence considering all these factors.
In light of the fact that Mr. Miller scammed two firms, putting one out of business and costing several people their jobs in the process, two and a half years seems surprisingly lenient. The fact that he bungled the scheme showed he didn't have any insider information, and that may well be what saved him from a much harsher sentence.
[Thanks to Reuters for the heads up]