Financial prosecutors have had their hands busy as of late. We've already discussed the Mathew Martoma saga here, and today brings another arrest, this time due to an allegedly fraudulent trade of Apple Inc. (NASDAQ:AAPL) shares. As originally reported by Reuters, ex-Rochdale Securities trader David Miller was arrested by the FBI today on charges of "wire fraud, alleging he lied about his trading of Apple shares ahead of the tech giant's Oct. 25 earnings announcement."
The chart above shows just how Apple Inc. (NASDAQ:AAPL)'s stock price reacted after missing Wall Street's earnings estimates by eight cents, losing more than 10% of their value in a little over two weeks time. In its complaint (via Reuters), the U.S. government claims that "Miller bought Apple shares for himself and then reported to Rochdale the trade was for a customer who would bear the risk if it lost money," essentially give the trader a rather egregious, self-made 'option' play, if you will.
When Apple Inc. (NASDAQ:AAPL) shares fell more than Miller expected, Rochdale was forced to take a loss of around $5 million in order to close the position, which according to the New York Times, "crippled the small brokerage firm," as it had only "a capital cushion of [...] $3.5 million supporting its operations."
Interestingly, Miller himself blames the trade on a "fat finger error," such as an attempt to purchase something like 165,000 shares of Apple Inc. (NASDAQ:AAPL) instead of ten times that amount. As noted in the Times, however, "Miller made the bet using the firm’s own capital" instead of that of his clientele, which implies that there's more to the story.
We'll let you know more information about this case as it arises; don't hesitate to share your thoughts on Miller's allegedly fraudulent trade of AAPL in the comments section below.