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MONTREAL—More than three years after the $4.9-billion (U.S.) PokerStars deal turned his company into one of the world’s largest online gambling businesses, David Baazov was in court Monday to face insider trading and market manipulation charges.


The trial that started in Montreal is the largest of its kind ever prosecuted by Autorite des Marches Financiers, the Quebec securities regulator. It’s set to be immediately stalled by a motion from David Baazov and five co-accused to dismiss the case, which they say was botched and can’t be processed within a reasonable time. The judge, Salvatore Mascia, asked to hear witnesses before making a decision on the motion, in particular, to understand why the prosecution released some evidence to defence by mistake.


Baazov’s Amaya Inc. won the backing of Wall Street investors such as Blackstone Group LP for his 2014 purchase of PokerStars owner Rational Group Ltd., a bold move for a company that had reported about $140 million in revenue the previous year. The AMF probe alleges that the accused used privileged information to trade Amaya shares between December 2013 — when Baazov first met the owners of PokerStars in person — through June 2014, when the transaction was announced.

Amaya shares rose more than 50 per cent in the month before the PokerStars deal was announced.


The former chief executive officer, who has denied wrongdoing, took a leave of absence in March 2016 after being charged and later cut ties with Amaya. He then unsuccessfully tried to take the company private and ended up selling most of his stake. Baazov, 37, still owns almost 4 per cent of the company, a stake worth about $134 million.


Amaya has since relocated from Montreal to Toronto, renamed itself the Stars Group Inc., and regained investor confidence as Baazov’s successor Rafi Ashkenazi lowered debt, overhauled the management team and beefed up online casino and sports betting offerings.


The five charges against Baazov include “aiding with trades while in possession of privileged information,” influencing or attempting to influence the market price of Amaya securities, and communicating privileged information. The co-accused are Benjamin Ahdoot, a reported childhood friend, Amaya consultant Yoel Altman, and three Ontario-based businesses controlled by Altman, for a total of 23 charges. All have pleaded not guilty.


The Montreal-based AMF has prosecuted about 15 insider trading cases in the past five years and won most of them, according to spokesperson Sylvain Theberge. Amaya’s size stands out because of the amounts at stake and the number of documents seized, he said.


Trial book


The prosecutors’ trial book, which lays out how the AMF is approaching the case, cites several communications between co-defenders as well as transactions to back the charges. The AMF says that Altman’s companies traded Amaya shares in December 2013 after he attended Baazov’s first meeting with the PokerStars owners and therefore had insider knowledge of the negotiations. 


It also alleges that in April 2014, Baazov and Altman were preoccupied by a drop in the price of Amaya shares and tried to prop it up. Yoel Altman received $1.4 million (Canadian) from Amaya in consulting fees and also got $200,000 (Canadian) from Adhoot, the AMF said. Through his company Diocles — one of the six accused — he bought about $2.25 million (Canadian) worth of shares between April 17 and May 27, according to the regulator.


A separate AMF probe on insider trading of Amaya shares involving 13 people, including Baazov’s brother Josh, is ongoing. Those parties are alleged to have realized a profit of close to $1.5 million (Canadian) between 2011 and 2016 by communicating privileged information about potential mergers and acquisitions related to Amaya, the regulator said.


Defence lawyers have been critical of the way the AMF handled the case, saying it was “instituted precipitously, before the investigation was sufficiently advanced,” according to the motion for a stay of proceedings. They say the disclosure of evidence has been “disorganized and tardy.”


In particular, they argue that the Sept. 21 release of 16 million items doesn’t leave them enough time to prepare for the trial and requires at least six months of analysis in order to ensure a full defence. That and other delays mean the trial can’t be completed within delays defined by a Supreme Court of Canada decision, they said.


Complicating the matter, the AMF told the accused weeks later that it meant to share two million items, not 16 million, and sent them a filtered version to work with.


Chronicles of Monte Friesner – Financial Crime Analyst

Courtesy of Toronto Star