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Apple stock manipulation: rogue AAPL trader pleads guilty, may face 25 years in prison
- — 16 April, 2013 18:08
A financial trader accused of an unauthorised purchase of 1.6 billion Apple shares with a view to making money fraudulently, has pleaded guilty to federal conspiracy and wire fraud charges. He may face 25 years in prison.
As we reported back in December last year, David Miller, who was employed as a sales trader by Rochdale Securities in Stamford, Connecticut, bought 1.6 million AAPL shares in an unauthorized $1 billion purchase on 25 October - the day before Apple announced its financial results for the September quarter. According to prosecutors the scheme was designed so Miller would profit if the stock price rose, but it declined.
Miller's customer claimed that they sought only 1,625 shares. Miller claimed that he had made a mistake and ordered many multiples of what was written in a client's order. The authorities claim this is untrue.
Rochdale suffered a $5.3 million loss as a result of the trade, described as: "Catastrophic losses for his [Miller's] former employer," US Attorney David B. Fein said in a statement obtained by Bloomberg. The firm eventually closed.
Miller also duped another broker at a rival brokerage into taking a short position in Apple stock, according to the prosecution. That dealer sold 500,000 AAPL shares while falsely claiming that he was trading for a company with which he had no relationship, according to the prosecution.
Miller's intention was to move to the rival brokerage if it earned a healthy profit on the sale of the 500,000 shares prior to Apple's results being announced. If AAPL had gone up and the rival broker lost money, Miller would have kept his job - and profits - at Rochdale, writes Electronista. The stock did decline after the financial results leaving him with a resulting shortfall of $5.3 million.
Miller is scheduled to be sentenced on 8 July. He may face 25 years in prison, according to prosecutors.
How big traders ruin it for small traders on AAPL
This case highlights one of the risks associated with trading Apple stock. Small traders need to be aware of the big funds who have the ability to invest or remove large sums of money from AAPL causing massive changes to the value of the stock.
It emerged that one of the causes of the AAPL stock decline in the fourth quarter of 2012 was the decision of four of the biggest hedge funds to dump billions of dollars of Apple stock.
Omega Advisors, Eton Park Capital Management, Jana Partners and Farallon Capital unloaded 796,000 Apple shares between September 30 and December 31, according to SEC filings.
Another recent example of big players causing big changes to Apple's stock include "a very premeditated unloading of some 800K shares (some $350 million worth) of AAPL in the last second [of trading]" on 25 January. Apple closed at a 52 week low of $439.88 that Friday.