Risk & Compliance

Man Accused of Making Phony Bid for Fitbit

Robert Murray allegedly gamed the SEC's EDGAR system to submit a tender offer for the company, enabling him to manipulate Fitbit's stock price.
Matthew HellerMay 22, 2017
Man Accused of Making Phony Bid for Fitbit

A Virginia-based mechanical engineer has been charged with manipulating Fitbit’s share price by filing a phony tender offer for the company on the U.S. Securities and Exchange Commission’s EDGAR system.

The SEC said Robert W. Murray, 24, purchased Fitbit call options on Nov. 10, 2016 minutes before filing the offer in which a sham company named ABM Capital sought to acquire Fitbit’s outstanding shares at a substantial premium.

When the false filing became publicly available on EDGAR, the SEC said in a civil complaint, the share price spiked by more than 10%, enabling Murray to make a profit of $3,118, a gain of more than 350%.

Murray has also been arrested on parallel criminal charges. He could face up to 20 years in prison if convicted of securities fraud and wire fraud.

“Murray created a fake tender offer for Fitbit to drive up its share price and then illegally profit from his manipulation of the market,” Joon H. Kim, the acting U.S. Attorney in New York, said in a news release.

According to the SEC, Murray perpetrated his scam after conducting “detailed online research” that included studying two prior commission cases involving individuals who made false EDGAR filings to manipulate securities prices.

On Nov. 8, 2016, the SEC said, he submitted a Form ID in the name ABM Capital to obtain login credentials to make EDGAR filings. The form allegedly falsely listed an executive of a Pennsylvania company with an office in Shanghai as the CFO of ABM and used the Shanghai office as ABM’s address.

The following day, Murray allegedly spent $887 to purchase call options for a total of 14,900 Fitbit shares with strike prices of $8.50 and $9.00 per share and — less than 30 minutes later — filed a form on EDGAR stating that ABM Capital had offered $12.50 a share to acquire Fitbit.

After the phony filing became publicly available through the EDGAR website on Nov. 10, the share price rose from $8.41 to a high of $9.28 on heavy trading. According to prosecutors, the sham tender offer resulted in a manipulation of the market by more than $100 million.