Industry Reports

Former Amaya CEO David Baazov Could Dodge Insider Trading Charges Due to Legal Gaffe

An insider trading trial against gambling mogul and former Amaya CEO David Baazov launched last month in Quebec but it seems it could soon come to an end. Quebec’s securities regulator, the Autorité des marchés financiers (AMF), has apparently mistakenly disclosed more than 320,000 documents with the defence. Now, four years after the $4.9-billion PokerStars deal that became a reason for the lawsuit, Baazov could dodge the charges due to the regulator’s legal gaffe.

The former top executive faces five charges for manipulating the market prior to the acquisition of PokerStars, a deal that eventually made Amaya the largest poker operator in the world. In 2014, Baazov purchased Full Tilt Poker, the parent company of PokerStars, for $4.9 billion, borrowing $3 billion. Later, he resigned from his position after he was charged with fraud by Canadian regulators, Amaya changed its name to The Stars Group, and the company moved its headquarters from Montreal to Toronto.

One of the major counts Baazov is charged with is influencing or trying to influence the market price of Amaya’s securities. In the month before the PokerStars deal was announced, the company’s shares jumped over 50 percent. Only a year before that, Amaya’s revenue had been around $140 million and still, somehow, Baazov managed to convince major Wall Street investors to back up the deal with $3 billion in additional funding. According to the regulator, the businessman used privileged information to trade his company’s shares between December 2013 and June 2014.

The other charges against him also include “communicating privileged information” and “aiding with trades while in possession of privileged information”. AMF has also accused two individuals, Amaya consultant Yoel Altman and Baazov’s childhood friend, Benjamin Ahdoot, as well as three Ontario-based companies. They face a total of 23 charges and all plead not guilty, including Baazov who also rejects all counts against him. Currently, his stake in The Stars Group is worth $173 million, or around 4 percent of the company.

Legal Gaffe Allows Third Attempt at Dropping the Charges

Defence attorneys have already tried to convince the judge to drop the charges against David Baazov and the other co-accused. Quebec court Judge Salvatore Mascia rejected two requests of the defence in January and in April to grant a stay of proceedings. First, lawyers argued that the trial was unreasonably delayed, which based on the Jordan ruling, could bring the lawsuit to its end. Last month, Judge Mascia rejected a second motion, in which defence lawyers claimed that the prosecution did not share evidence with them in time.

This is the third time Baazov’s lawyers are filing a motion. This time, their argument is based on AMF’s strange decision to limit their access to a piece of evidence. They accuse the regulator of an “abusive procedure” after it sent an email to defence on May 15. According to it, AMF accidentally shared more than 320,000 documents that were potentially confidential. It is important to note that the evidence disclosed by the Montreal-based regulator included millions of documents, at least according to defence lawyers, who said when filing the previous motion that it would be physically impossible for them to look at all these papers.

Therefore, the AMF asked the judge to remove the mistakenly shared documents from disclosures. In their third attempt to get the judge to drop the charges, defence lawyers have now filed a motion in which they say that pulling evidence at such an advanced stage of the trial violates defendants’ “fundamental constitutional rights”. The penalties for charges of this nature are up to 5 years in prison and $5 million in fines.