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The Amaya Gaming Group headquarters are seen Friday, June 13, 2014 in Montreal. Allegations of insider trading against 13 people affiliated with the ex-CEO of online gaming company Amaya Inc. will be discussed this morning at a hearing by an independent tribunal overseeing Quebec's financial sector. THE CANADIAN PRESS/Ryan RemiorzThe Canadian Press

Quebec's securities regulator presented a "distorted picture" of events in outlining how former Amaya Inc. chief executive officer David Baazov was the source in a sophisticated insider-trading and kickback scheme involving a group of closely knit friends and associates, his lawyer says.

Sophie Melchers of Montreal law firm Norton Rose Fulbright said the Autorité des marchés financiers (AMF) built a theory about what happened based on selective information, which it then presented to an administrative tribunal this past spring to win cease-trade orders and the freezing of certain bank accounts for 13 individuals in the case.

Ms. Melchers spoke on Thursday at a hearing of that tribunal, asking its members to issue a new decision on those orders that considers the fact the AMF's probe is ongoing and that refrains from coming to any conclusion about any alleged tipping by Mr. Baazov.

"Without knowing if these people actually spoke to each other, without knowing what they said to each other, the AMF built a theory stipulating that these individuals should have been in the possession of privileged information when they made their trades," she said. "And the AMF speculates, it supposes, that the information these people supposedly had came from David Baazov."

The AMF alleges that its investigation has uncovered a major leak of privileged information stretching back six years by which Mr. Baazov provided tips, mostly to his brother Josh, about upcoming takeover deals involving Amaya and other companies. Several people traded on the information that eventually filtered out, reaping about $1.5-million collectively. Those who gave the tips received compensation from others, the AMF says. It has filed bank statements, phone records, e-mails and text messages to build a circumstantial case against the 13 individuals. One piece of proof is a phone recording of one businessman talking to his wife about information allegedly "coming from David." None of the individuals has yet been charged.

Mr. Baazov faces insider-trading charges in a separate case related to Amaya's 2014 purchase of PokerStars owner Oldford Group Ltd. He has pleaded not guilty.

The regulator had an obligation to provide full and frank disclosure to the tribunal about what it knows about the circumstances surrounding Mr. Baazov's alleged involvement in the trading scheme and it failed to do so, Ms. Melchers said. It did not, for example, submit a complete picture of phone records between the individuals. It also chose not to include certain information that was publicly available about the companies they traded on, which could explain those trades. It also largely ignored the confidentiality provisions Amaya has in its business agreements.

All of these things might have led the tribunal to draw different conclusions than possible insider trading, Ms. Melchers said.

"What you've been presented is a distorted picture of the situation," she told the tribunal members.

Further, she said, the AMF has no evidence Mr. Baazov received any kickbacks as part of this scheme. An AMF investor earlier acknowledged there is no proof yet of any payment or gift given to Mr. Baazov, only a reference to a payment in correspondence between certain individuals.

"So Mr. Baazov apparently repeatedly broke the law in exchange for nothing," Ms. Melchers said. "And for the benefit of people with whom, for the most part, he doesn't have any contact. Why would he do that?"

The tribunal will now rule on the merits of keeping and expanding previous freeze and cease-trade orders in place for the 13 individuals, since lowered to 12 after a deal was struck with one person. A decision could take weeks or even months.

It could also clarify its view on Mr. Baazov's role in the affair. It was the tribunal itself that added the former Amaya CEO as a party to the proceedings earlier this year, given the allegations being made by the AMF.

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