HARTFORD, Conn. (AP) -- A securities trader admitted Monday that he participated in a scheme involving the unauthorized purchase of about $1 billion of Apple stock that wound up costing his employer $5 million, federal prosecutors said.
David Miller of Rockville Centre, N.Y., pleaded guilty in Hartford to conspiracy and fraud offenses, the U.S. Attorney's office said.
"This defendant participated in a fraudulent scheme in which he would either reap huge profits through the unauthorized purchase of approximately $1 billion of Apple stock or, if he faced huge losses, explain it away as simple human error," U.S. Attorney David Fein said. "This scheme caused catastrophic losses for his former employer and was unraveled promptly by the FBI."
The investigation is continuing, Fein said.
Miller's attorney says he regrets what he did and the harm it caused.
"Those who know David know that what happened here was out of character for a kind and generous family man who has lived an otherwise law abiding and good life," said his attorney, Kenneth C. Murphy. "When the time comes he will accept his punishment and he will spend the rest of his life trying to make up for the wrong he committed."
Authorities say the 40-year-old Miller, while employed as an institutional sales trader for Rochdale Securities LLC of Stamford, conspired with another individual to execute a trade to buy 1.6 million shares of Apple stock on behalf of a Rochdale customer whose account Miller handled on the day Apple was scheduled to announce earnings.
The order was written in a way that Miller could later claim he misinterpreted it, authorities said. Miller would execute a trade for 1,000 times the number of shares written in the order. If the trade proved profitable, Miller and his co-conspirator would share in the profits and if the trade proved unprofitable, Miller would claim human error, leaving Rochdale holding the losing position, prosecutors said.
After Apple announced its earnings later that day, the stock price began dropping and it became clear that the trade would not be profitable. When confronted, Miller falsely claimed that he had made a mistake in ordering many multiples of what was written in a client's order, authorities said.
As a result of the scheme, Rochdale was left holding about 1.6 million shares of Apple and sustained a loss of $5.3 million.
Miller also defrauded another broker-dealer into taking on a significant short position in Apple stock to hedge against the large purchase of Apple stock he was executing at Rochdale, authorities said.
Miller, who has been released on a $300,000 bond since his arrest on Dec. 4, is scheduled to be sentenced on July 8 and faces up to 25 years in prison.