The founder of online poker company Amaya Inc. wants the insider-trading case against him dismissed, saying Quebec's securities regulator has fumbled its prosecution so thoroughly that he can't be tried in a reasonable amount of time.
David Baazov and five other defendants filed a motion to stay the proceedings on Oct.17, court records show. The request comes less than two months before their trial is scheduled to start on Dec. 11 in the Court of Quebec.
"This case is a textbook example of a penal proceeding that was instituted precipitously, before the investigation was sufficiently advanced and without a significant amount of relevant evidence being gathered, much less analyzed," Mr. Baazov's lawyer, Sophie Melchers of Norton Rose Fulbright, wrote in the motion application.
The prosecution, led by Quebec's financial watchdog, the Autorité des marchés financiers (AMF), charged the defendants without doing enough legwork first and failed to follow a plan to minimize delays in the case, Ms. Melchers says in the motion.
She says the result has been a "piecemeal, disorganized and tardy disclosure of the evidence," including 16 million items of data released to the defence in mid-September.
The development marks a new turn in one of Canada's biggest insider trading cases before the evidence against Mr. Baazov gets a public airing, exposing the difficulties of investigating and prosecuting this type of corporate crime.
It also calls into question the limits of a fragmented provincial securities regulatory system with a poor record of policing suspicious price runups in Canadian stocks ahead of deal news.
One query at the heart of the case is why so many investors bet on Amaya, a minnow-sized Montreal online-gambling company, months before news broke about its improbable $4.9-billion (U.S.) takeover of betting giant PokerStars. Trading in Amaya stock was frenzied in the weeks before the deal was announced in June, 2014, amid industry rumours of a tie-up between the two companies.
The AMF believes information was leaked deliberately in advance, partly to pump up the value of Amaya shares. In March of last year, when Mr. Baazov was still chief executive officer of Amaya, it laid five charges against him 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."
The regulator also charged Benjamin Ahdoot, a childhood friend of Mr. Baazov, and Yoel Altman, an Amaya adviser, with insider trading and attempting to influence the market price of Amaya stock. Diocles Capital Inc., Sababa Consulting Inc. and 237489 Ontario Inc. were also charged with similar offences. If found guilty, the accused face fines and prison terms.
The defendants have denied any wrongdoing. Amaya has since changed its name to The Stars Group Inc. and relocated its headquarters to Toronto.
A separate probe was also opened against other associates of Mr. Baazov, alleging they profited from trades made with privileged information that originated from him. A dozen people are targeted in that investigation, including Josh Baazov, Mr. Baazov's brother. The AMF says the individuals operated a sophisticated system through which kickbacks were paid in exchange for tips on several impending takeover deals. No charges have been laid in that probe, dubbed "Project Bronze."
The defence in the David Baazov case has complained repeatedly about the lack of disclosure by the AMF. But the document dump of 16 million items on Sept. 21 appears to have triggered a request to dismiss the proceedings. The files all relate to Project Bronze and it is imperative that the defence be granted a chance to review them, Ms. Melchers says in her motion.
When they received the external hard drive containing the data in September, lawyers for Mr. Baazov copied it and sent the copy to their information-technology consultants, according to the court filing. The consultants, OpenText, advised that the hard drive contained 3.7 terabytes of raw data and that it would take four to five weeks to organize the information for review at a cost of about $505,000 (Canadian).
The defence team gave OpenText the green light to proceed. According to the court filing, Mr. Baazov's lawyers would have been able to start an analysis of the documents this week. They say they would need a minimum of six months to review the information.
Under the current timelines set out for David Baazov's trial, it is anticipated that it would end in April, 2018, with a verdict rendered by the end of July, 2018. That works out to 28 months after charges were laid, a time frame that already exceeds the 18-month, start-to-finish limit for provincial court cases set out in a recent Supreme Court ruling known as Jordan.
Granting the defence an opportunity to review the new data would bring the lapse of time to an estimated 37 months, more than twice the limit, according to the court filing. "The length of the delays in this case result neither from the defendants' conduct nor the institutional delays in the district of Montreal but directly from the AMF's actions and sloppiness," the motion says.
Sylvain Théberge, a spokesman for the AMF, said the regulator remains convinced it can prosecute the case effectively. "The AMF is ready for the start of the trial and we will keep for the court all relevant elements of this important case," he said.
Adam Sharon, a spokesman for David Baazov, declined to comment.
Lawyers for Mr. Baazov believe that a news release he put out in February, 2016, announcing his intention to take Amaya private created pressure on Quebec's securities regulator "to get the charges against him out quickly to allow the AMF to make information it had gathered in connection with its investigation public and thwart the privatisation plans," according to the motion.
Mr. Baazov scrapped that plan about 10 months later after weeks of questions about whether his overseas backers had the financial wherewithal to fund the $4.1-billion (U.S.) deal. Since then, he has kept a low profile.
Employees of Canaccord Genuity Securities, Amaya's investment banker, are among those expected to testify if the case moves ahead. An anonymous informant is also expected to be heard.
The judge will hear the motion to dismiss the case on Dec. 11, when the trial is scheduled to start.