The Federal Bureau of Investigation announced Friday that Timothy M. Mucciante, 43, pleaded guilty to one count of securities fraud after he placed purchase orders to buy more than $20 million in government securities, knowing he did not have the money to pay for them.
The transaction caused Utah-based Zions Bank to lose more than $430,000, according to the FBI. The government alleged Mucciante engaged in a practice commonly known as "free riding," where a person orders securities in the hopes that the price will rise before he has to pay for them. If the price rises, the securities can be sold at a profit before the original purchase payment is due. In this case, the price dropped, leaving Zions Bank to cover the loss.
Mucciante, the chief executive officer of Castle Mount Group of Troy, Mich., faces a maximum sentence of 10 years in prison and a maximum fine of $1 million. He is scheduled to be sentenced on Dec. 2.