HARTFORD (CN) - A brazen registered securities trader drove his employer out of business by blowing millions of dollars on 2.1 million fraudulent and unauthorized buy and sell orders for Apple stock in a single day, the SEC claims in Federal Court.
The SEC sued David Miller in Federal Court. Miller, 40, of Rockville Centre, N.Y., is the only defendant.
He was a registered representative for Rochdale Securities in Connecticut when "he alone or in concert with others concocted a scheme during 2012 to place a series of unauthorized orders on one day to buy a total of more than 1.6 million shares of Apple," the SEC says in its complaint.
After markets closed on Oct. 25, 2012, Apple was due to release its earnings report for the quarter ended Sept. 30.
On that day, a Rochdale customer "appeared to instruct Miller to purchase 1,625 shares of Apple stock," the complaint states. "Instead, pursuant to the scheme, Miller intentionally and fraudulently entered a series of orders to purchase a total of 1,625,000 shares of Apple (at a cost of almost $1 billion), misrepresenting to Rochdale and its principals and employees that the Customer authorized the orders and assumed the risk of loss on any trades executed pursuant to the orders. [Parentheses in complaint.]
"On the same day, Miller also intentionally defrauded another registered broker-dealer and its employees ('Broker 1') by placing a sell order for 500,000 shares of Apple stock under false pretenses: specifically, that Miller was employed by, and authorized to place the order on behalf of, a separate registered broker-dealer ('Broker 2'). Contrary to his representations to Broker 1, Miller had no relationship with Broker 2, nor was he authorized to trade on Broker 2's behalf.
"Miller, alone or in concert with others, planned to share in the Customer's profit from selling the 1,625,000 shares if Apple's stock price increased following the expected earnings announcement later that day. Alternatively, if Apple's stock price decreased, Miller planned to claim that he inadvertently misinterpreted the size of the Customer's order, and planned for his employer, Rochdale, to take responsibility for the unauthorized purchase and suffer the losses. In the latter scenario, Miller expected to then profit on his sale of 500,000 shares of Apple stock through Broker 1, thereby hedging his bet.
"Apple's stock price decreased after Apple's earnings release was issued on October 25, 2012. The Customer denied buying 1,625,000 Apple shares, and, as Miller planned, Rochdale took responsibility for the unauthorized purchase. Rochdale then sold the Apple stock, resulting in an approximately $5.3 million loss and causing Rochdale's 'net capital' (essentially, its available liquid assets) to fall below limits required by Commission rules applicable to broker-dealers. [Parentheses in complaint.]
"Miller's conduct involved fraud, deceit, or deliberate or reckless disregard of regulatory requirements, and resulted in substantial loss, or significant risk of substantial loss, to other persons: for example, as a result of Miller's conduct, Rochdale effectively ceased operations and virtually all of Rochdale's staff left for other jobs (or were let go) in or about November 2012."
Miller also was charged criminally, the SEC said.
It seeks an injunction and penalties.
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