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Former Stamford Firm Employee Charged in Scheme that Lost $5M

A sales trader at a Stamford-based firm allegedly committed fraud to purchase more than 1.6 million shares in Apple that would end up costing his company more that $5 million.

The U.S. Attorney for the District of Connecticut and New Haven Division of the F.B.I. announced Tuesday that a 40-year-old New York man was charged with wire fraud in relation to an alleged stock-purchasing scheme while he was employed as a sales trader with a Stamford-based firm.

According to authorities, David Miller, of Rockville Centre, was allegedly involved in a wire fraud scheme during his time as an institutional sales trader with Rochdale Securities LLC of Stamford, where he is accused of making $1 billion in unauthorized purchases of Apple Inc. stock in a get-rich-quick scheme that backfired.

U.S. Attorney David Fein said the scheme caused "massive losses for his employer." It is alleged in the criminal complaint filed against him that Miller executed a trade to buy 1,625,000 shares of Apple Inc. stock on October 25, 2012, the day Apple was set to announce it's earning for the quarter.

The scheme was designed so that Miller would allegedly profit if the stock price rose after Apple announced its earnings later that day.  In allegedly falsely representing to Rochdale that he was simply executing a customer order, Miller misrepresented that the customer was at risk of loss if the trade proved unprofitable, when he knew that it was Rochdale that would bear the risk of loss.

“As is so often seen in these types of cases, the alleged criminal conduct of Miller was for personal gain at the expense and detriment of others,” stated FBI Special Agent in Charge Kimberly Mertz.  “Manipulating and orchestrating stock transactions in such a manner is a very serious criminal offense and its impact can be both devastating and lasting.  Today’s arrest underscores the FBI’s commitment to investigating this and all types of securities fraud in our nation’s stock markets.”

Apple's announcement caused a drop in stock prices. When the customer stated he had only ordered 1,625 shares of Apple, Miller allegedly falsely claimed he'd made a mistake in ordering any multiples of what was written on the client's order.

As a result, Rochdale was left holding in excess of 1.6 million shares of Apple stock, and suffered losses of approximately $5 million when it traded out of the position.

"I commend the FBI, with the substantial assistance of the SEC and FINRA, for its rapid response and for bringing this defendant to justice," Fein said. "The U.S. Attorney’s Office and our many partners on the Connecticut Securities, Commodities and Investor Fraud Task Force are committed to protecting investors and the integrity of American capital markets. This investigation is ongoing."

While he was executing the scheme at Rochdale, it is alleged that Miller 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 that, in reality, he had no relationship with and for which he was not authorized to trade. 

It is alleged that 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.

Miller surrendered Tuesday to the FBI in Bridgeport, where he appeared before a U.S. Magistrate before being released on a $300,000 bond. Miller faces 20 years imprisonment if convicted.   

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