Apple share dive scuppers trader's alleged get-rich-quick fraud scam
Fruity FAIL leaves accused with $1bn of duff stock
A US trader has been charged with fraud by the Feds over a get-rich-quick scheme involving over 2 million Apple shares and $1bn.
The trader, David Miller, bought 1.625m shares in Apple on October 25 this year, the day that the fruity firm was scheduled to announce its earnings for the quarter. Miller told his bosses at Rochdale Securities that he was buying the shares for a customer and it was the customer who would lose money if Apple's share price somehow fell.
Unfortunately, Apple's stock price did drop after the earnings result, leaving Rochdale with the losses. Miller appeared to already have a way out of the situation, since the customer actually did order 1,625 fruity shares, so he just claimed that all those extra zeroes were a mistake.
But Miller already had himself backed up another way, having convinced another broker to take a short position on 500,000 Apple shares, claiming he was trading for a company that he had no relationship with. In shorting, the broker would have borrowed the shares and sold them on before the earnings release, after, when the stock went down, he buys the shares again and the new lower price and repays them, pocketing the difference.
The short position was intended to hedge against the huge purchase of Apple stock he'd made at Rochdale. Rochdale ended up with 1.6m Apple shares that it had to sell on at a loss of around $5m.
“As alleged, this defendant orchestrated the unauthorised purchase of approximately $1 billion of Apple stock in a fraudulent get-rich-quick scheme that backfired, causing massive losses for his employer,” US Attorney David Fein said in a canned statement. ®
If this had worked his bosses would have patted him on the back and paid him a big bonus.
This is the problem, the brokerage companies turn a blind eye to illegality which profits them. This idiot should have been prosecuted regardless of how it turned out and until it becomes common for brokerages to prosecute any breach of trust irrespective of the outcome then things like this will continue to happen.
Why all the fuss?
Surely he just needs to point out he's too big to fail, and ask for a bailout payment to cover the loss?
Re: Double Standards
I hate it when they say shorting is good because it provides liquidity to the market. Sorry, but I thought the original idea of stock markets was to invest in companies, not to gamble on losses for a quick buck. All I see you ever get out of this is extremely volatile environments.
This and high-frequency trading... don't get me started on that one *grumble grumble*
Load of pirates, the lot of them, if you ask me.