The biggest insider trading investigation in Canadian history has entangled a Jewish charity in Montreal whose director was confronted by investigators during a recent raid with $87,000 in cash that had been in his car.
The charity insists it has nothing to do with the probe and has taken legal action to get the money back.
The Autorité des marchés financiers (AMF) is pursuing a probe into allegations of insider trading following Amaya Inc.'s acquisition of PokerStars in 2014. As part of that effort, two AMF investigators, accompanied by a police officer, executed a search warrant at Montreal's Centre Chabad on the morning of June 20 this year, according to court documents related to the case.
They were looking for information about the centre's banking records as well as all communication its employees had with individuals targeted by the investigation, close family and friends of former Amaya chief executive David Baazov.
The charity operates a resort and conference centre in the Laurentians called Escale Chabad du Nord.
Court filings show the investigators seized binders, USB keys and papers during the multi-hour raid, including an unspecified "accounting document" linked to Craig Levett as well as two receipts for accommodations made out to him. Mr. Levett is a former consultant for Amaya who worked with Josh Baazov, David Baazov's brother.
The same search warrant was used to obtain Mr. Levett's bank records at Royal Bank of Canada's offices in Montreal's Place Ville Marie Tower as well as information about his brother Earl Levett's Visa account at CIBC offices on René Levesque Blvd.
Craig Levett is among 13 people facing freeze and cease-trade orders related to what the AMF says was a sophisticated scheme to profit from insider tips about Amaya's takeover of PokerStars and other mergers and acquisitions stretching back to 2010. In the system of money-making and kickbacks, each person who gained from the tips paid the equivalent of 10 per cent of their net profit to the person who supplied the information, the AMF says. David Baazov was "the source of a major leaking of privileged information," the regulator says.
Craig Levett traded on that information and also passed it on to others, including Earl Levett, for which he was compensated, the AMF alleges. The 13 people have not been charged. An independent tribunal overseeing Quebec's financial sector will hold a hearing on the cease-trade orders Monday.
During the June raid at the Centre Chabad, while AMF investigators were doing their work, the centre's director, Rabbi Shalom Chriqui, asked one of his volunteers to fetch a bag from his car, according to an account of the day's events outlined in court documents filed by the centre's lawyers. The bag contained 4,350 bills of $20 totalling $87,000, and Mr. Chriqui did not want it to be stolen, according to the account.
The police officer took the bag and the AMF investigators began asking Mr. Chriqui about the money, according to court documents. In the end, they were not satisfied with his answers and seized the cash.
"Following the explanations given [by Mr. Chriqui], I had reasonable grounds to believe that one of the suspects of the investigation recently transferred $17,000 in cash to the Centre Chabad while he was under a freeze order prohibiting him from disposing of funds," said a note from AMF investigator Xavier Saint-Pierre contained in an official report on the raid. Mr. Saint-Pierre also said Mr. Chriqui's answers to questions about the money and that suspect changed over the course of the day.
In a 105-page document supporting the need to maintain and expand the cease-trade orders against the 13 individuals, the AMF says that Earl Levett made a $15,000 donation by cheque to the Centre Chabad in July, 2014, a month after Amaya announced its $4.9-billion takeover of PokerStars. The money came from his gains on Amaya trades, the regulator says.
That same July, Craig Levett and his consultancy, Baalev, received 20 cheques totalling $98,000 from the Centre Chabad, according to a preliminary analysis of the centre's banking records cited by the AMF in the 105-page document. The AMF believes the Jewish centre was used to "hide the money trail", according to court testimony provided by Mr. Saint-Pierre and cited by Montreal's La Presse newspaper.
Craig Levett did not return a message seeking comment on Friday. Earl Levett declined to comment. Mr. Chriqui was not reachable. Sébastien Delisle, a lawyer with Dunton Rainville, which represents the Centre Chabad, did not respond to an e-mail seeking comment.
Centre Chabad describes itself as a charity that raises money for community programs and religious education "for the purpose of advancing Jewish culture and instilling a reverence for the spiritual, ethical and moral values and traditions of the Jewish faith." In registration documents filed with the federal government, it declared revenue of about $130,000 for 2014.
The $87,000 seized by the AMF comes from several financing activities held by the Centre Chabad, Dunton Rainville said in a court filing seeking the return of the money. That includes $47,000 in voluntary contributions made by visitors to the Centre Chabad retreat in Sainte-Agathe-des-Monts, $25,000 in donations during an annual gala, as well as $15,000 in proceeds from the sale of something called "Hioula candles" after a religious ceremony honouring saints.
The money was supposed to help finance the operations of a summer camp for Hasidic Jewish youth, the law firm says. It added that the AMF seized the money illegally.
David Baazov comes from a family of orthodox Jewish faith that fled Georgia for Israel, where he was born. He has told reporters and associates his parents arrived in Montreal with so little money they depended on support from friends in the orthodox community for housing and food. A college dropout, Mr. Baazov once said that he was kicked out of the family home after he broke from his parents' orthodox faith.
The entrepreneur, who turned Amaya, once a small online gambling tech company, into the world's dominant player in online poker, was charged in March in the insider trading case. He faces five charges "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." He has denied any wrongdoing.