On March 23, the AMF filed charges against Baazov “for aiding with trades while in possession of privileged information, influencing or attempting to influence the market price of the securities of Amaya inc., and communicating privileged information.”
Both Amaya and David Baazov could not have been more vehement in denying the allegations. Amaya itself has not been accused of any wrongdoing.
“As always, I continue to be dedicated to doing the right thing for Amaya and all its stakeholders,” said Baazov on announcing that he was taking time out from his executive duties to fight the charges.
“I believe that stepping down in the short term will help to avoid distraction for the company and its management while I vigorously contest all allegations made against me and pursue my bid to acquire the company.”
In the update Amaya issued on the day the charges were made public, the Amaya board made pointed reference to its own internal investigation which:
“… found no evidence of any violations of Canadian securities laws or regulations. The independent members of the board received and reviewed the information and concluded that no action should be taken. We have not been provided with any new information upon which the AMF’s allegations of infractions are based.”
“David Baazov has the full support of the independent members of the board,” said Dave Gadhia, Amaya’s lead director and independent board member, and the former executive vice chairman and CEO of Gateway Casinos & Entertainment Inc.
The internal review was supervised by its independent board members with the assistance of external legal counsel from Osler, Hoskin & Harcourt LLP in Canada and Greenberg Traurig LLP in the United States.
However, following the disclosure of further investigations by the AMF, the Amaya board has given the Special Committee formed to analyze Baazov’s potential bid for Amaya, directions to “investigate these additional matters.”
The AMF charges extend far beyond David Baazov.
Yoel Altman, Benjamin Ahdoot Diocles Capital Inc., Sababa Consulting Inc. and 2374879 Ontario Inc were charged at the same time as Baazov, and all have pleaded not guilty.
The case also drew charges against Baazov’s brother, known as Josh Baazov, Craig Levett, Nathalie Bensmihan, Isam Mansour, Mona Kassfy, Allie Mansour, John Chatzidakis, Eleni Psicharis, Alain Anawati, Karl Fallenbaum, Earl Levett, Feras Antoon and Mark Wael Antoon.
The AMF alleges that these people “traded while in possession of privileged information or they leaked privileged information about potential mergers and acquisitions involving Amaya inc. in particular.”
The main charges carry potential sentences of up to five years in prison, plus a fine of between CA$5,000 and CA$5 million.
Securing a conviction in any insider trading case is tough. The practicalities of a bid like the one Amaya made for the Oldfield Group mean that a lot of people rapidly become aware of the possibility of the transaction, even though they may have no direct involvement.
When a lot of strange guys in suits come into modern open plan offices, and sit down with the CEO and CFO, the junior staff notice and talk about it.
The gaming world is not big. Most middle and senior executives recognize each other and have met at conferences.
In other words, it is no surprise that Amaya’s share price accelerated shortly before the purchase of PokerStars – too many people, in investment banks, law firms, accountants, and the company staff themselves, knew about the transaction in advance.
This is not an uncommon situation, but the share price impact is rarely as significant as it was for Amaya. On the other hand, there was plenty of other public corporate information which could also be responsible for the share movement.
The AMF knows that obtaining a successful conviction is difficult, but it is giving it its best shot. AMF spokesman Sylvain Theberge said that the cases will now be forwarded to the court, where a judge will be appointed and a trial timetable scheduled.