Quebec's securities watchdog says it has uncovered a sophisticated system of insider trading involving former Amaya Inc. chief executive David Baazov by which kickbacks were paid in exchange for stock tips on several impending takeovers. The deals stretch back six years – long before Amaya took over gambling behemoth PokerStars in 2014.
Further, the Autorité des marchés financiers (AMF) says some members of a close-knit network of family and friends continued trying to profit from privileged information into this year, seemingly unperturbed by the regulator's investigation into the matter.
In court documents laying out its case against Josh Baazov, David's brother, and 12 others who faced allegations in March of trading on inside information involving Amaya, the AMF says its investigation has found evidence that the group had a refined system that rewarded insider information with kickbacks typically representing 10 per cent of the net profits gained.
"These were the activities of an organized group that traded regularly on information of numerous mergers and acquisitions still unknown to the public," the AMF said in the documents, adding the individuals involved sometimes used coded language to conceal the real meaning of their messages to each other.
Information filtered down and out in a pyramid-like fashion with David Baazov being the source of much of the privileged intelligence, the regulator alleges. Kickbacks were paid in many forms, including cash, cheques and luxury objects such as a $13,000 Rolex Daytona watch, the regulator said. In all, the AMF estimates the individuals made a combined profit from the trades of about $1.5-million.
The evidence in the court documents shows AMF investigators have accessed e-mails, text messages and phone and bank records belonging to many of the individuals as it tries to piece together a case against David Baazov and other associates. It is the biggest insider trading investigation in Canadian history.
The AMF laid charges in March against Mr. Baazov in relation to Amaya's $4.9-billion (U.S.) takeover of PokerStars owner Oldford Group Ltd., notably for aiding with trades while in possession of privileged information, influencing or attempting to influence the market price of Amaya securities, and communicating privileged information. Benjamin Ahdoot, a childhood friend of Mr. Baazov, and Yoel Altman, an adviser to Amaya, were also charged with insider trading.
A related but separate, non-penal case was also opened in which the AMF executed search warrants and obtained freeze and cease-trade orders against 13 people including Josh Baazov and Craig Levett. The two men worked together at firms called Blackbelt and Baalev, both of which did consulting for Amaya, according to the AMF. The regulator accused the 13 of trading on inside information about potential M&A involving Amaya.
Ian Robertson, a spokesman for David Baazov, said Mr. Baazov's lawyers have filed a notice contesting the AMF's allegations. "Mr. Baazov is innocent of any wrongdoing and he is eager to present his defence," Mr. Robertson said by e-mail.
The AMF alleges in this new document that some or all of the 13 individuals traded on information related to at least six impending takeover deals, starting with Amaya's initial play for Cryptologic Ltd. in late 2010 and continuing well into this year with David Baazov's announcement of his offer to take Amaya private for $21 per share.
Two of the deals the individuals made money on – Scientific Games' purchase of WMS Industries Inc. and the Intertain Group's purchase of some assets belonging to Gamesys – did not involve Amaya, but the regulator says the evidence suggests David Baazov's connections allowed him to obtain information to tip off others.
The trail of information was relatively clear, although it differed for each transaction, according to the AMF. In general, the documents allege, David Baazov passed on privileged information on some deals to his brother Josh and to Mr. Levett. Josh Baazov communicated information to Mr. Levett and to Isam Mansour, alias Sam Miller, who previously worked with the two men at Blackbelt, according to the allegations. Mr. Levett and Mr. Mansour in turn are alleged to have told others.
In one 2013 e-mail detailed by the AMF, Mr. Levett wrote to Josh Baazov with the subject "WMS" and said: "Hi Josh. Here is what we owe your brother. I will have a check [sic] for him and you to [sic]." According to the regulator, Mr. Levett later made out two cheques totalling $32,100 to Josh Baazov, also known as Ofer Baazov, which were cashed. On the cheques, Mr. Levett had allegedly written: "gift."