It's the kind of phone call that happens on Bay Street all the time: Is your investment firm interested in getting in on a deal?
Yet, what happened in the days and weeks that followed that 2014 call is, supposedly, not so common at all.
According to the Ontario Securities Commission, the analyst who helped sign up his firm, Aston Hill Asset Management, then told his officemate, and then his roommate, about the pending transaction.
While the analyst didn't buy any shares in the company in question – Amaya Gaming Group Inc. – his officemate, officemate's relatives, his roommate and his roommate's father did, the OSC says, racking up more than $350,000 in profit.
And then, when Aston Hill asked its employees to turn over trading records over the period in question, the officemate – a portfolio manager at the firm – failed to provide brokerage statements, instead turning over transaction histories that left out all the trades, according to the OSC.
Now, OSC staff have levelled allegations against four men, two of them the former employees of Aston Hill, of insider trading. A hearing is set for later this month.
The case is sure to capture less attention than that of former Amaya chief executive David Baazov, who faces insider-trading charges in Quebec related to the same 2014 merger. Two other men and three corporations are also charged in the Quebec case; all have pleaded not guilty.
The OSC allegations related to Aston Hill, however, describe a situation in which three individuals, all in close proximity to an insider with material, non-public information, made a series of propitiously timed and profitable trades in the stock in question. (Aston Hill combined with another firm in 2016 and the new entity is known as LOGiQ Asset Management. The firm had not responded to a request for comment by deadline.)
The OSC says that Majd Kitmitto, a senior analyst at Aston Hill, was the firm's contact person when Canaccord Genuity Group Inc. reached out to see whether it would be part of the acquisition of the PokerStars and Full Tilt Poker brands by Amaya. (Amaya is now known as the Stars Group.) Mr. Kitmitto, the OSC says, signed a non-disclosure agreement "on or about" April 29, 2014, and Aston Hill subsequently placed Amaya on its restricted trading list.
The OSC says Mr. Kitmitto "informed his officemate," Steven Vannatta, "of material, non-public information about Amaya." On April 29, May 6 and May 14, the OSC says, Mr. Vannatta bought $31,650 worth of Amaya shares, which he sold after the June 12 announcement for a profit of $96,136, a 304-per-cent return. The OSC says Mr. Vannatta then passed the Amaya tip to four relatives in Alberta, who made a combined profit of about $195,000.
Mr. Kitmitto, the OSC alleges, also tipped his friend and roommate, Christopher Candusso, the owner of a women's-skincare company. Mr. Candusso then tipped his father, a dentist, the OSC alleges. The men, whom the OSC says had made no stock-market trades of any kind in the prior two years, made profits of $30,782 and $31,956, respectively.
Ian Smith, the lawyer for Mr. Kitmitto, declined to comment for this story. Chris Kostopoulos, the lawyer for Mr. Vannatta, says "we will defend this case vigorously and we look forward to having a hearing in this matter and establishing the trades conducted by Mr. Vannatta were without insider information."
Alistair Crawley, the lawyer for Christopher Candusso, says "Christopher's decision to make a small speculative trade in Amaya was his own and was not influenced by any improper disclosure from Mr. Kitmitto. The OSC's allegations are based on pure conjecture. Christopher knew that his friend Majd covered Amaya in his role as an analyst, but had no idea that he had begun working on a potential transaction involving Amaya. He intends to defend the proceeding."
Bruce O'Toole, the lawyer for Claudio Candusso, says "Claudio's decision to purchase Amaya in 2014 was made after he had been following the online gambling industry for several months. He was not influenced by any improper disclosure from Mr. Kitmitto or anyone else. The OSC's allegations are false and he intends to defend himself in the proceeding."
The OSC alleges that Mr. Vannatta, when asked as part of a firm-wide review by Aston Hill to submit all his brokerage statements for April and May, 2014, told his firm they were not available, then submitted a 45-day transaction period for two accounts that left out his first two Amaya trades. He did not provide any information for the account in which the third trade occurred, the OSC alleges.
The OSC alleges Aston Hill then asked employees with regular access to material, non-public information to certify a list of all their trading accounts – and Mr. Vannatta then left off the account that included his most recent Amaya trade.
Then, the OSC says, in interviews it conducted with Mr. Vannatta under oath, he claimed he did not know he'd made the third trade and said he'd submitted statements for all of his accounts. The OSC says this means Mr. Vannatta has made statements that are "misleading and untrue."