Wow, someone managed to make money on Fitbit stock – oh, 'fraudulently'
Bloke accused of setting up bogus share-trading biz in pump-and-dump scam
While Fitbit investors may be weeping over the wearable upstart's slumped share price, at least one person made out like a bandit on the stock, allegedly.
On Friday, America's financial watchdog, the SEC, filed fraud charges against Robert Murray, of Virginia, accusing him of ramping up Fitbit's stock price temporarily via dodgy investment deals. The regulator claims Murray trousered an, admittedly modest, $3,118 in less than 24 hours via the scam.
In a complaint [PDF] filed in a New York district court, the SEC claims Murray abused the watchdog's online form-filing system EDGAR. Murray is accused of using the website to setting up a fake company that announced an bogus plan to purchase Fitbit stock at a premium.
The SEC claims that his organization, ABM Capital, was created out of thin air using executive names copied from the website of a Pennsylvania outfit, with an office supposedly in Shanghai. He is accused of using a notary stamp with a fake name and number on documents, which fooled the EDGAR system into letting him create an account for the bogus biz.
The charges state that on November 9, at 1116 ET, Murray spent $877 on options on Fitbit stock that would show a significant profit if Fitbit's share price rose within two days. 11 minutes later, it is claimed, he logged onto EDGAR as ABM Capital and spoofed his IP address to make it look like he was connecting from California.
Within minutes a submission was filed on EDGAR from ABM Capital stating that the firm wanted to buy all outstanding Class A common shares of Fitbit at a price of $12.50 per share (they were hovering around $8 at the time). The attempt failed because the sender mucked up Fitbit's identification number, but a second submission succeeded and was posted on the SEC's website.
Naturally the share price rose sharply within minutes of the posting, rising 10 per cent before Fitbit issued a statement that the filing was false. According to the SEC, Murray used the interim period to sell his options and realize about three grand in profit, but would have made $53,200 if the share price had risen to the planned $12.50 per share.
The SEC said it obtained and examined Murray's web search history showed he had investigated similar types of fraud using the EDGAR system just before carrying out the attacks. The agency squarely accuses Murray, and possible accomplices, of seeking to manipulate the market for profit.
"As alleged in our complaint, Murray used deceptive techniques in a concerted effort to evade detection, but we were able to connect the dots quickly and hold him accountable," said Stephanie Avakian, acting director of the SEC Enforcement Division.
Murray has been charged with violating multiple antifraud provisions of the federal securities laws. The US Attorney’s Office for the Southern District of New York also announced criminal charges against Murray on Friday. ®