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Crime The Almighty Buck The Courts Apple

Trader Pleads Guilty To Illegal Purchase of Nearly $1B In Apple Stock 174

Posted by timothy
from the teacher's-pet-in-overdrive dept.
An anonymous reader writes "A trader who last year made an unauthorized purchase of nearly US$1 billion worth of Apple stock has pled guilty to wire fraud, securities fraud and conspiracy. On October 25, 2012 — the same day Apple posted its Q3 2012 earnings — David Miller of Rochdale Securities made a number of unauthorized purchases of Apple shares which ultimately led to the demise of the financial services firm he worked for. The aim of Miller's action was to make a lot of money very quickly by purchasing large quantities of Apple shares and selling them in a post-earnings surge."
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Trader Pleads Guilty To Illegal Purchase of Nearly $1B In Apple Stock

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  • by alen (225700) on Tuesday April 16, 2013 @12:32PM (#43463073)

    oh wait
    never mind

    at least the Mac blogs i still read keep on pumping the stock

  • by gnasher719 (869701) on Tuesday April 16, 2013 @12:35PM (#43463119)
    Buy $1bn worth of shares in the name of your company. If it works out and the shares go up by one percent, sell them for $1bn and $10 million, take the $10 million, and run. If it doesn't work out, your company goes broke and you go to jail.
    • by cdrudge (68377) on Tuesday April 16, 2013 @12:42PM (#43463231) Homepage

      So in other words, just another day on the stock market...

      • Of course, the economic collapse and recession are due to those *eeeeeevil federal regulators forcing banks to make bad loans and not freeing the market to correct itself...

      • So in other words, just another day on the stock market...

        Except for the go to jail part. I guess someone richer bribed enough politicians to get this guy prosecuted.

    • Re: (Score:3, Interesting)

      by greg1104 (461138)

      He almost recreated the business model of every large bank. The missing step is that when you have a loss, you then ask for a bailout because it will hurt the economy if you fail.

    • by nedlohs (1335013)

      If it works you get your X% of the profits for doing the trades - if they don't notice (or don't care) that you broke the rules anyway.

    • Buy $1bn worth of shares in the name of your company. If it works out and the shares go up by one percent, sell them for $1bn and $10 million, take the $10 million, and run. If it doesn't work out, your company goes broke and you go to jail.

      Heh. I guess the pleasure his wife was giving him to encourage this behavior was too much - clouded his thought processes. Unprecedented lawsuit against her in 5....4....3...2..

  • by TimHunter (174406) on Tuesday April 16, 2013 @12:44PM (#43463261)
    Somehow this is Tim Cook's fault. Steve Jobs would never have let it happen. Also it proves the inherent superiority of Android over the iPhone. I just haven't quite figured out how yet. I'm sure somebody will, though.
    • by rvw (755107)

      Somehow this is Tim Cook's fault. Steve Jobs would never have let it happen. Also it proves the inherent superiority of Android over the iPhone. I just haven't quite figured out how yet. I'm sure somebody will, though.

      In short: he needs a jailbreak!

  • by femtobyte (710429) on Tuesday April 16, 2013 @12:44PM (#43463263)

    Color me skeptical, but for some reason I doubt that a trader who recklessly threw a billion dollars on the stock market roulette table and *won* would be outed by his firm and sent to jail. Rather, he'd be the "ballsy financial genius" who'd be in charge of $10 billion next time. And of course, this type of perverse incentive system only encourages the next thrill-seeking gambling addict to try their own play. A few years in a minimum security white-collar slammer, versus the chance to take your cut of zillions in winnings gambling on others' money? Sounds like a gamble far too many "I earned my position by skill, not chance!" scamming scum would take.

    • That depends on his company. Some companies may be wary of a reckless attitude about financial regulations especially with what has happened in the last several years. He may have been fired anyway. Then again some other companies may have promoted him for bold initiative, but they would have had to cover him for his crimes if the SEC investigated.
      • by mapsjanhere (1130359) on Tuesday April 16, 2013 @12:54PM (#43463395)
        They would have laid him off with a golden parachute and a huge non-disclosure. Unauthorized high-risk trading is not something you let your investors know about, even if it went well. It shows your internal procedures lacking at the very least.
      • That depends on his company. Some companies may be wary of a reckless attitude about financial regulations especially with what has happened in the last several years. He may have been fired anyway. Then again some other companies may have promoted him for bold initiative, but they would have had to cover him for his crimes if the SEC investigated.

        *rubs hands* Yes... sometimes laundering works veeeery well. Mwahahaha!

    • This is a big problem with today's stock market (and its regulation).

      I mean sure, this guy was caught. But a lot of them have gotten away with a lot of things before they were caught. Simply because there is inadequate oversight.

      Too much speculation is not a good thing. Legitimate investment in a company can be a good thing. But there is no fundamental difference between stock speculation and gambling, except that the stakes are usually higher.

      I would remind people that the 2008 debacle was largely
      • by Teancum (67324)

        I would remind people that the 2008 debacle was largely caused by irresponsible speculation and corruption (falsely valued derivatives, etc). Complete with government collusion (the problems with Freddie and Fannie).

        The fiasco in 2008 was due to the credit rating agencies over valuing the "safety" of the derivatives and other investments, claiming that they were rated as "AAA" or some other "safe" investment, when in fact they were more or less worthless (the term commonly used is "junk" status as in "junk bonds"). One of the reasons for this was because of an inappropriate relationship between the companies who were exploiting the inflated ratings on their debt instruments and the credit rating agencies, where the "i

        • "The fiasco in 2008 was due to the credit rating agencies over valuing the "safety" of the derivatives and other investments, claiming that they were rated as "AAA" or some other "safe" investment, when in fact they were more or less worthless (the term commonly used is "junk" status as in "junk bonds"). One of the reasons for this was because of an inappropriate relationship between the companies who were exploiting the inflated ratings on their debt instruments and the credit rating agencies, where the "investors" who were using the information from the rating agencies weren't really the customers paying for the ratings."

          That's called "corruption", which I believe I mentioned.

          "Some of this can be blamed on the part of the investors involved, as they shouldn't be looking at "free" things given by brokers who are tweaking the numbers to extract more money from these investors."

          Yes but. Yes they should have researched better, but they were being told by the "experts" that those were good investments. I don't think you can absolve the creators and raters of the derivatives from the vast majority of responsibility. After all, THEY did it on purpose. The others were victims.

          "There is nothing wrong with speculation in and of itself, as long as the people involved in making those investments are well aware of the risks involved."

          I should have worded more carefully. My point was that it is fundamentally no different from gambling. I don't think we are really disagreeing much here. Wha

        • On the rare chance that Fannie Mae or Freddy Mac turn a profit, the profits disappear into the fiscal black hole known as the National Debt, so there is really no incentive at all to even be efficient or to consider the needs of their investors when making decisions. Such is the case for any government agency, so it isn't exclusive to just these two agencies.

          Oh it is much better than that. When Freddy and Fannie were making (virtual) profits in the late 90's and early 00's, they were taking the money and blowing it on useless projects such as E-Closing and Web based appraisal projects. None of these every provided any benefit to anyone other than the contractors being overpaid to develop the software.

      • Too much speculation is not a good thing. Legitimate investment in a company can be a good thing. But there is no fundamental difference between stock speculation and gambling, except that the stakes are usually higher.

        Could you *PLEASE* take this on with the oil industry?

    • by u38cg (607297)
      If your risk controls work properly, you treat unauthorised wins as severely as you do losses. Unfortunately, that doesn't always happen. However, it does happen more often than you think - just with no attendant publicity.
      • by femtobyte (710429)

        "just with no attendant publicity," i.e. with no one getting arrested, and no troublesome SEC scrutiny. The perpetrator just gets a nice wad of shut-up money, and a glowing recommendation letter for a job at his boss' most hated competitor firm. Or, perhaps a new job as a congressional staffer advising on financial regulation.

        • by u38cg (607297)
          Well, no. There may be a pay-off but it's unlikely you'd ever trade anyone else's money again. And if the risk controls are done right, then such actions are entirely transparent to the SEC.
    • by alen (225700)

      no, because any legit trade would also involve hedging in case of loss

    • by Beorytis (1014777)
      You're probably right. It's a shame we can't give these jobs to monkeys. And put a 99% income tax on monkeys.
  • https://www.fbi.gov/newhaven/press-releases/2013/rochdale-securities-trader-admits-role-in-fraudulent-scheme-involving-nearly-1-billion-purchase-of-apple-stock [fbi.gov]

    "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"

    how is this in any way different than regular financial trading? it seems to me the word 'unauthorized' was applied after the investment company decided this guy was a nuisance.

    again:

    "Risk is inherent in the investment world, but that risk should never be borne from the actions of investment professionals who choose to serve their own financial agendas rather than those of their client" stated FBI Special Agent in Charge Mertz.

    if investment bankers didnt serve their own financial agendas im sure Lexus would be a far less profitable company and the hamptons would have a few less mailboxes.

    • by UnknowingFool (672806) on Tuesday April 16, 2013 @01:16PM (#43463657)
      Most likely the unauthorized part had to deal with the size of the purchases. A trader does not have unlimited buying power. He could bankrupt the whole company (which he did). He worked with an accomplice to make purchases he should not have been allowed to make. Also the FBI noted.

      Miller convinced the broker-dealer to sell 500,000 shares of Apple stock, falsely claiming that he was trading for the account of a company, which he had no relationship with and for which he was not authorized to trade.

    • I agree that it's suspicious the way things suddenly become "crimes" once companies don't approve of them. However there do seem to be distinctly criminal elements to what this trader did: taking very deliberate actions to invest money in an unauthorized way, making trades on behalf of a non-existent client. So I believe this case truly is a criminal matter. On the other hand, I doubt that it would still be considered if someone higher up had done the same thing (using more complex excuses to cover up th
    • by u38cg (607297)
      Traders have limits they cannot (well, should not) breach. And normally, you'd hedge your exposure as well, so you're not just exposed to the stock going up in smoke.
  • ...to not fail, apparently.
  • Unauthorized? (Score:5, Insightful)

    by DarthVain (724186) on Tuesday April 16, 2013 @01:08PM (#43463569)

    Erm. How does one spend ONE BILLION dollars unauthorized? Wouldn't the firm be at fault? Someone singularly has the ability to decide to spend a billion dollars on something?

    • by afidel (530433)

      Usually it's because the trader has a set pot of money to trade with and certain risk limits he is supposed to adhere to but the actually trading system does not have business logic rules to enforce these limits because it would slow down trading too much. Basically the whole infrastructure of the big financial firms are setup to accommodate risky day trading instead of sound business investments like any other business would expect. Basically trader desks resemble video poker terminals more than they do th

  • How is it even possible to unauthorizedly purchase stock? That sounds almost as impossible as me R-ing TFA lol. Stock either is for sale or isn't and it's all checked by computers. You can't just go to ebay and buy something that's not there and I thought stocks were the same.
  • by JonahsDad (1332091) on Tuesday April 16, 2013 @01:37PM (#43463925)
    I was going to suggest that the trader stick to frozen concentrated orange juice, but I see that it was down that day too, so it wouldn't have worked.
  • You know you have screwed up on a truly grand scale when you not only end up in prison (which isn't particularly hard nowadays), but also manage to completely destroy the company you work for, all in the same step. (Impressive for a non-executive anyway, CEOs do this sort of thing on an almost daily basis)

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