Quebec’s securities watchdog stated that it has discovered a sophisticated system of insider trading with the involvement of former Amaya Inc. chief executive, David Baazov, which allowed kickbacks to be paid in exchange for stock tips on several imminent takeovers. The deals date back six years, long before Amaya purchased PokerStars, a gambling behemoth, in 2014.
Also, the Autorité des marches financiers (AMF) claimed that some members of a secret and close network of family and friends maintained their efforts to acquire profit from privileged information way into this year, unbothered by the regulator’s investigation into the matter.
Outlined in court documents presenting its case against Josh Baazov, David’s brother and 12 others accused in March of trading on inside information involving Amaya, the AMF stated that its investigation has found evidence that the group had a detailed system that awarded insider information with kickbacks frequently representing 10 percent 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, mentioning that the involved individuals made use of coded language to hide the real meaning of their messages to each other.
The regulator alleged that information was released and trickled down in a pyramid-like fashion with David Baazov being the source of much of the privileged intelligence. It added that kickbacks could be paid in various forms including cash, cheques and luxury objects such as a $13,000 Rolex Daytona watch. In total, the AMF believes the individuals made a joint profit from the trades of roughly $1.5 million.
The court documents had evidence showing AMF investigators had made access to emails, text messages, phone and bank records pertaining to many of the individuals, in an effort to piece together a case against David Baazov and other associates.
This marks the biggest insider trading investigation in Canadian history.
In March, charges were laid by the AMF against Mr. Baazov in connection to Amaya’s $4.9-billion (US) takeover of PokerStars owner, Oldford Group Ltd., mostly for assisting with trades while in full knowledge of privileged information, manipulating or attempting to manipulate the market price of Amaya securities, and relaying privileged information.
Benjamin Ahdoot, a childhood friend of Mr. Baazov and Yoel Altman, an adviser to Amaya, were also charged with insider trading.
An associated but separate, non-penal case was also opened, in which search warrants were executed by the AMF and freeze and cease-trade orders were obtained against 13 people including Josh Baazov and Craig Levett. Both men worked together at Blackbelt and Baalev, both consulting for Amaya.
The 13 were accused by the regulator of trading on inside information about potential M&A involving Amaya.
A spokesman for David Baazov, Ian Robertson, said Mr. Baazov’s lawyers have placed a notice opposing 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.
In this new document, the AMF alleges that some or all of the 13 individuals traded on information connected to at least six impending takeover deals, commencing with Amaya’s initial play for Cryptologic Ltd. in late 2010 and dragging 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 got profit from– Scientific Games’ purchase of WMS Industries Inc. and the Intertain Group’s purchase of some assets belonging to Gamesys – did not include Amaya. However, the regulator stated that evidence points out that David Baazov’s connections permitted him to get information to tip off others.
According to the AMF, the trail of information was rather clear, although it was different for each transaction. Generally, the documents seemed to show that David Baazov passed on privileged information on some deals to his brother Josh and to Mr. Levett. Josh Baazov transferred information to Mr. Levett and to Isam Mansour, alias Sam Miller, who previously worked with the two men at Blackbelt. Mr. Levett and Mr. Mansour, in turn, are assumed to have told others.
Mr. Levett, in a 2013 email detailed by the AMF, 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].”
The regulator asserted that Mr. Levett made out two cheques totaling $32,100 to Josh Baazov, also known as Ofer Baazov, which was cashed. Written on the cheques by Mr. Levett was the word “gift”.