A former trader at Rochdale Securities has been charged with wire fraud by the U.S. attorney’s office of Connecticut for allegedly purchasing $1 billion of Apple (NASDAQ:AAPL) stock in an unauthorized trade that led to massive losses for the trading firm. David Miller’s trade cost Rochdale $5 million against a balance sheet of $3.4 million, The Wall Street Journal said.
Miller appeared before a U.S. magistrate on Tuesday and was released on a $300,000 bond.
The buy order for 1.625 million shares of Apple was made on October 25, which was the day the company reported its fourth fiscal quarter earnings report and when the stock closed the trading day at $609. However, shares slipped sharply in late trading and continued to fall in the following days and weeks, eventually reaching as low as $505.75. Miller had been banking on the shares to rise.
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After the stock fell, Miller told Rochdale that he had inadvertently bought the 1.625 million shares for a client who had wanted 1,625 shares, according to the criminal filing against him. While the firm was able to trade out of more than 1.6 million shares, it took a loss of around $5 million. However, Miller not only made that buy order for Apple shares, but also entered into a short order with another broker under the pretense of working for a different firm. The second brokerage was left with a short position of 500,000 Apple shares, but eventually traded out at a profit when the stock fell.
Rochdale has not been able to trade securities or issue stock research reports since a little after the trade because of its cash situation. In addition, at least 14 employees have deregistered with the firm, including the co-heads of its trading operations, according to Financial Industry Regulatory Authority data, The WSJ said.
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