Stock trader sentenced to prison for getting rich quick – Hartford Courant
A stock trader who bankrupted his employer by risking $1 billion of Stamford company money on an unauthorized and ultimately doomed personal investment was sentenced to 2.5 years in prison on Tuesday .
Faced with what he called “crushing” personal debt, trader David Miller, 40, hatched a scheme to deal with his personal financial problems by buying 1.6 million shares of Apple stock and then trading at around $700 per share.
Miller bought the shares for a bogus client using funds from his employer, Stamford’s former Rochdale Securities. He was betting that Apple stock would rise on the back of a favorable third-quarter earnings report, expected on Oct. 25, 2012, the day of the stock purchase. But the price fell on the report, as did Miller’s illegal deal.
Rochdale managed to recoup some of the loss through trading. But the partnership, hitherto a well-regarded small business, was stuck with a further loss of $5 million. Unable to find a white knight to bail out the business, Rochdale eventually closed, leaving around 40 people out of work and the partners stuck with huge losses and damaged reputations.
Miller, who was sentenced in Hartford District Court in the United States on Tuesday, offered a long, tearful apology, saying, “I don’t deserve to be forgiven.” Elsewhere in the courtroom, the Rochdale founder and his partners remained impassive.
“A single act of greed shattered everything that had been worked for for 37 years,” said Carl Acebes, who founded Rochdale on a loan from his father.
Rochdale chairman Dan Crowley said: “We were successful. It was a place where dreams were made. All of that was disrupted the day David decided to get rich with our money.”
Miller, an institutional trader, lived in a modest house on Long Island with a young family. But he was deep in debt in the second half of 2012 when he hatched his get-rich-quick scheme with a partner whom authorities have neither identified nor charged.
The plan was to engage in unauthorized trading in Apple shares and take advantage of the anticipated volatility after the earnings announcement. Miller and his partner would split the profits, if any. The risk would fall on Rochdale, since the company’s money was at stake.
The partner had to submit an order to Miller for 125 shares of Apple every half hour. Instead, Miller would transmit buy orders at a multiple of 1,000 times what was in the written order.
If the stock proceeds the way Miller wanted, U.S. Attorney Paul A Murphy said in a court filing, Miller and his partner would unwind their position in the after-hours trading market and split the profits. If the price dropped, Miller would claim—as he eventually did—that he misread the purchase order, leaving Rochdale with the loss.
The scheme left Rochdale with 1,623,375 shares of Apple. The company quickly traded part of the position, but still suffered a loss of $5.3 million.
The value of the collateral Rochdale posted against the losses with its clearing broker was included in the loss. To cover trading losses, the broker who authorized Rochdale’s trades seized collateral and sold it over the weekend when Storm Sandy hit the tri-state area, resulting in a sharply reduced sale, said the prosecutors.
As a result, Rochdale was forced to suspend trading. Eventually his traders left and he closed.
Miller had previously pleaded guilty to conspiracy and fraud. U.S. District Judge Robert N. Chatigny ordered him to repay Rochdale for his losses upon his release from prison.