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Chesapeake man concocted elaborate scheme to boost Fitbit stock, feds say, all for just $3,000 & New

2017-06-04 12:57 [INVESTING] Source:Netword
Guide:Investigators say his sham offer from a made-up Chinese company to buy all of of Fitbit

A Chesapeake man filed false information with the SEC last year indicating a Chinese firm was interested in buying Fitbit, according to court documents.

News of the possible buyout drove the fitness tracker’s stock up 8.4 percent, investigators said.

Robert Walter Murray’s take from the alleged scheme? $2,916.08.

Murray was arrested in May on one count each of securities and wire fraud. If convicted, he faces a maximum of 20 years in prison on each charge.

A preliminary hearing is set for June 19 in U.S. District Court in Manhattan.

His public defender did not return a call and email seeking comment.

According to a complaint in the federal case, Murray filed a sham tender offer Nov. 9 with the SEC indicating a firm with an address in Shanghai was interested in buying all of Fitbit’s outstanding Class A common stock for $12.50 a share. The stock was trading that day at $8.55.

The offer was signed and certified as true by a person claiming to be the chief Financial officer of ABM Capital LTD.

The filing became public the following morning, driving the stock to a high of $9.27 per share. Investigators claim the offer, given the number of shares outstanding at that time, fraudulently increased Fitbit’s market value by more than $122 million.

Over the course of the day, however, Fitbit representatives denied the company had received the tender offer. The stock closed at $8.86 per share.

The U .S. Postal Inspection Service linked the filing to an email account that was created Nov. 5 – four days before the filing.

Investigators were able to see what websites the user of that email account had visited and found he had checked out at least two on Nov. 8 to see whether his computer’s IP address was disguised.

Investigators also connected the email account behind the fake tender offer to Murray by researching information the user provided when it was set up. Among other things, investigators discovered there was a backup email address on file.

A review of emails to and from that backup uncovered a hotel reservation in Washington, D.C., for a man named “Rob Murray,” court documents said. Investigators determined that email account also was accessed by a computer at the home of Greg Murray in Chesapeake, Robert Murray’s father.

Robert Murray profited from the temporary price spike in Fitbit stock by buying 149 “call options” for nearly $1,000 before the fake tender offer was public, court documents said.

A call option is an agreement that gives an investor the right to purchase a security at a particular price in the future, allowing investors to place what are in effect leveraged trades on the direction of a particular security’s price.

Murray sold the options on Nov. 10 for $3,914.08 – a 292 percent profit.

“In an effort to ‘get rich’ quick fraudsters believe they can game the system,” Philip Bartlett of the U.S. Postal Inspection Service in new York said in a statement. “But this arrest proves that no matter how much thought goes into a devious scheme, you can never outsmart law enforcement.”

Murray was not the first person to be charged with manipulating stock prices by filing fake documents with the SEC.

Investigators said he studied two other recent stock market manipulation cases before filing the Fitbit documents. One involved Avon Products, Inc., which was the target of a similar scheme in May 2015, and the other involved Integrated Device Technology Inc., which was the target of one in April 2016.

Scott Daugherty, 757-446-2343, [email protected]

New,2017

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