Last year David Miller, a securities trader at the boutique (a polite term for small and not well known) brokerage firm, Rochdale Securities, saw an opportunity to make a quick buck.
This was about the time that everyone realized Steve Jobs was really dead and not coming back and people noticed Samsung actually made a smart phone that was just as good as an iPhone.
Apple stock was imploding. Dave Miller however expected a surprise positive earnings report which he thought would give the stock a pop.
He took a supposed client’s order for 1,625 shares to the trading room but purposefully purchased 1,625,000 shares instead (moving the decimal point over three digits gave him the out to say, “Ooops, I made a mistake. Silly me, I put the decimal in the wrong place.”). If your math is not that good, this is a billion dollar trade made at little Rochdale, not Goldman or JP Morgan or some hedge fund.
Miller figured Apple stock would rise, he would use the firm’s capital to back the trade, pay his client the profits on 1,625 shares and keep the rest. Hamptons summer house rental and Porsche payment in the bag!
Well, unfortunately Apple’s earnings disappointed the street and Mr. Miller.
The stock went down and he lost $30 million dollars on the fake trade.
Rochdale Securities didn’t have $30 million. So, the punch line; the firm closed its doors, laid off 40 people and Miller was just sentenced to 30 months in prison.
In case you were wondering what happened to the stock, at the time of the trade Apple was at $601.25, it is now trading at $515.00. He would still be a loser.