May 19, 2017 / 5:29 PM / 2 years ago

U.S. charges Virginia man in Fitbit stock hoax

NEW YORK (Reuters) - A Virginia man who orchestrated a hoax takeover bid that drove up Fitbit Inc’s stock price last November, yet made only about $3,000 for his efforts, has been arrested and charged with fraud, U.S. prosecutors said on Friday.

Robert Walter Murray, 24, of Chesapeake, was accused of submitting a sham regulatory filing in which the nonexistent, Shanghai-based ABM Capital Ltd offered to buy Fitbit for $12.50 per share, roughly a 46 percent premium.

The filing caused Fitbit’s share price to rise 8 percent to $9.27 on Nov. 10, boosting the company’s market value by $122 million, before the San Francisco-based maker of step counters and other wearable devices denied knowledge of any tender offer.

Authorities said Murray had spent less than $1,000 on Fitbit call options, a bet the share price would rise, just before submitting the hoax offer, and made a roughly $3,000 profit in one day by selling the options after the stock jumped.

Murray was charged with securities fraud and wire fraud, and faces up to 20 years in prison for each. The U.S. Securities and Exchange Commission filed related civil charges against him.

Murray appeared in federal court in Manhattan on Friday and was released on a $250,000 bond, according to a spokesman for federal prosecutors.

Christopher Flood, a court-appointed lawyer representing Murray, could not immediately be reached for comment Friday evening.

The defendant joins several others accused of stock price manipulation through hoax filings with the SEC’s Edgar database.

Authorities said Murray concealed his identity by accessing Edgar through an account that appeared to be associated with a company in Napa, California, and having the filing signed by a Kevin Mead, ABM’s purported chief financial officer.

They also said Murray prepared for his scheme by studying two recent market manipulation cases involving hoax takeover bids.

These concerned Nedko Nedev, a dual U.S.-Bulgarian citizen criminally charged in March 2016 over bids for Avon Products Inc and Rocky Mountain Chocolate Factory Inc, and Nauman Aly, a Pakistani man charged with fraud by the SEC last May over a bid for chipmaker Integrated Device Technology Inc.

Fitbit was not accused of wrongdoing, and did not immediately respond to a request for comment.

The cases are U.S. v. Murray, U.S. District Court, Southern District of New York, No. 17-mag-03407; and SEC v. Murray in the same court, No. 17-03788.

Reporting by Jonathan Stempel in New York; Editing by Richard Chang and David Gregorio

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