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Rogue trader guilty of billion-dollar iFraud

16 Apr 13

A rogue American trader has pleaded guilty to buying around US$1 billion worth of Apple stock, without prior authorisation.

Former Rochdale Securities trader David Miller accepted charges of fraud and conspiracy following the incident, which carries a maximum jail term of 25 years.

The court heard how Miller bought 1.625 million Apple shares on October 25 last year, coinciding with the company's third-quarter results.

In a bid to benefit from the financial report release, Miller falsely told Rochdale the trade was for a customer who had only ordered 1,625 shares.

But as with anything, the dodgy deal spectacularly backfired, leaving Rochdale with $5.3m of losses on the remaining shares - whatever 1.625 million minus 1,625 is.

With the company undercapitalised, Rochdale ceased operations as a result of the gamble - leaving Miller deep in the brown stuff, with nowhere to hide.

"Miller's scheme was deliberate, brazen, and ultimately ill-conceived," said Daniel M. Hawke, chief of the SEC Enforcement Division's Market Abuse Unit.

"This is a wake-up call to the brokerage industry that the unchecked conduct of even a single individual in a position of trust can pose grave risks to a firm and potentially to the markets and investors."

Miller's lawyer Kenneth Murphy rather obviously disagreed however, claiming:

"What happened here was out of character for a kind and generous family man who has lived an otherwise law-abiding and good life," Miller's lawyer told the court.

"He deeply regrets what he has done and the harm it has caused to other people, including the former principals and employees at Rochdale."

While not claiming to know the man, or even his motives, it seems a classic case of "deeply regrets" getting caught, not so much the harm it caused.

Miller could face a lesser sentence of five to eight years through a plea agreement.