CEO of online gaming company Amaya faces charges of market manipulation

MONTREAL – The CEO of Amaya has been charged following an investigation by Quebec’s stock market watchdog into insider trading related to a 2014 blockbuster acquisition that transformed the Montreal firm into the world’s largest online poker company.

David Baazov, 35, faces five charges, including influencing or attempting to influence the market price of the securities of Amaya and communicating privileged information.

“These allegations are false and I intend to vigorously contest these accusations,” Baazov said in a statement Wednesday.

“While I am deeply disappointed with the (Autorite des marches financiers) decision, I am highly confident I will be found innocent of all charges.”

He was charged as part of an investigation by the AMF that resulted in 23 charges against three people — Baazov, Yoel Altman and Benjamin Ahdoot —and three companies: Diocles Capital Inc., Sababa Consulting Inc. and 2374879 Ontario Inc.

The charges stem from the alleged use of privileged information when trading company shares between December 2013 and the June 2014 announcement of a US$4.9-billion deal to acquire the Oldford Group. That deal included the acquisition of PokerStars, a wildly popular gambling website.

The accused have 30 days to plea to the charges. A trial led by AMF lawyers would be overseen by a Quebec Superior Court judge, said AMF spokesman Sylvain Theberge.

The penalty for insider trading is $5,000 to $5 million per charge plus up to five years in prison, Theberge added. He said the investigation is continuing.

The AMF also announced it executed search warrants and obtained court orders to stop the activities of 13 additional people, including Baazov’s brother Josh, who traded in different securities while in possession of privileged information.

The 13 people are alleged to have used their access to information to reap nearly $1.5 million in profit over five years starting in 2011, the AMF said. It specifically mentions information about potential mergers and acquisitions involving Amaya Inc. (TSX:AYA).

An independent administrative tribunal associated with the AMF also immediately suspended the operating licence of one of the 13 people named: John Chatzidakis, an independent insurance and financial adviser associated with Sun Life Financial. Sun Life Financial said his contract is being terminated.

Last fall, Amaya secured approval to operate the PokerStars and Full Tilt online gaming sites in New Jersey. The New Jersey Division of Gaming Enforcement said it is closely monitoring the case.

Amaya has long denied allegations of wrongdoing by the company, officers or directors and said the investigation wouldn’t have any impact on its operations.

It said an internal review supervised by independent board members with the assistance of external law firms found no evidence of any securities laws or regulations. The company also said it has not been provided information upon which the AMF’s allegations are based.

“David Baazov has the full support of the independent members of the board,” Dave Gadhia, Amaya’s lead director and an member of the board, said in a news release.

David Baazov said he is still committed to working with a group of investors to conclude a proposed takeover of the company that he announced last month.

Jon Levin, a corporate lawyer with Fasken Martineau, said the outcome of the AMF investigation is uncertain and can take years to complete.

“The securities regulators in Canada do not have a good track record of winning insider trading cases,” he said.

A trading halt on Amaya shares was issued before the Toronto Stock Exchange opened Wednesday. Amaya shares closed on Tuesday at C$18.57, giving it a market value of nearly C$2.5 billion.

After trading resumed, Amaya’s stock plummeted, wiping out all gains since the PokerStars deal was announced.

The shares closed down more than 20 per cent to $14.75, amounting to a loss of about C$510 million on Wednesday or $3.2 billion since its peak of $38.74 in November 2014.