Sean Gallup/Getty ImagesA trader at Rochdale Securities is said to have purchased about $1 billion of Apple stock without permission.A former trader at Rochdale Securities has been arrested and charged with fraud after his well-publicized purchase of $1 billion worth of Apple stock, a trade that put the firm in financial peril.
According to a criminal complaint filed Tuesday by the United States attorney for the District of Connecticut, the trader, David Miller, set out to defraud Rochdale when he began trading in Apple shares on Oct. 25, the day the big technology company reported its third-quarter earnings.
Mr. Miller told Rochdale that he was buying roughly 1.6 million Apple shares for an unnamed client. However, this client was looking to buy just 1,625 shares, leaving Rochdale liable for the rest.
Prosecutors say that Mr. Miller was betting Apple’s shares would rise on the news. However, the stock fell after the firm’s earnings report, leading to losses of roughly $5 million for Rochdale.
Separately, Mr. Miller was talking to yet another brokerage firm, leading it to sell short or bet against Apple shares. This was done, according to the complaint, to hedge against his other position. This brokerage house was able to trade out of the position at a profit.
Mr. Miller, according to the complaint, had been planning this trade for some time and in the weeks leading up to Apple’s earnings he had made false representations to the brokerage firm that shorted the stock in order to help facilitate the trade.
“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,” an F.B.I. agent, Kimberly K. Mertz, said in a statement. “Manipulating and orchestrating stock transactions in such a manner is a very serious criminal offense and its impact can be both devastating and lasting.”
Kenneth C. Murphy, a lawyer for Mr. Miller, declined to comment. Daniel J. Crowley, the president of Rochdale, did not return a call for comment.
Based in Stamford, Conn., Rochdale (pronounced “Rockdale”) is one of a number of smaller lesser-known firms on Wall Street. The firm employs about 60 people, including Richard Bove, a well-known bank analyst, who is based in Florida.
This episode left the firm in need of a white knight but so far one has not materialized.