A former stock trader who
bankrupted his former employer in a bet on Apple stock that went bad, and who
pleaded guilty to wire fraud and conspiracy in a plea deal, has been sentenced to prison for his crimes - for one-tenth of the maximum time he faced. David Miller, 41, will serve
30 months in prison for his scheme to buy more than 1,000 times the amount of AAPL a customer ordered, on the same day that Apple was to announce its third-quarter revenues in 2012. He planned to sell the excess stock when the price rose, and pocket the difference for himself.
However, as often happens when Apple announces strong results, the stock actually went down instead. Miller had attempted to create a "hedge fund" parachute in case his bet didn't materialize, allowing him to easily jump ship from
Rochdale Securities in Stamford, Connecticut to another unidentified firm. Miller told a rival brokerage that he was leaving Rochdale, and might come to work for them.
He asked the rival brokerage to sell a half-million shares of AAPL just before the earnings were announced, which they did - earning a healthy profit that would have smoothed the way for Miller to jump ship if his bet was wrong. Had AAPL gone up and the rival broker lost money, Miller would have kept his job - and profits - at Rochdale.
The incident began when Miller improperly bought nearly $1 billion in AAPL rather than the $1 million requested by a client, and planned to blame a typographical error if he had been detected. He expected Apple's stock price to rise after the quarterly announcements, and then would sell the excess stock, keeping the expected profit. When AAPL dipped in price after the
earnings results due to a small drop in iPad growth, the resulting shortfall of $5.3 million was so severe that Rochdale found itself undercapitalized, unable to make speculative purchases or execute customer order.
The company was soon unable to continue operations and laid off its staff in November, withdrawing its registrations with the SEC and the state of Connecticut in late February 2013 after settling customer accounts. Rochdale was not a party in the case and was never accused of wrongdoing, according to Reuters.
Miller was arrested by the FBI shortly afterwards on
fraud charges. His lawyer characterized the incident as "out of character for a kind and generous family man who has lived an otherwise law-abiding and good life." Attorney Kenneth Murphy told the court back in April that Miller "deeply regrets what he has done and the harm it has caused to other people, including the former principals and employees at Rochdale."
Miller is still facing a civil lawsuit over the incident, brought by the Securities and Exchange Commission. His attorney was not available for an updated comment.
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