Insider-Trading Case Against David Baazov Dismissed

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Wednesday, June 13th, 2018 | Written by Stephen Smith

The legal charges against former Amaya CEO David Baazov were thrown out of court on Wednesday, June 6, 2018. Baazov had been suspected of insider trading in connection with the 2014 acquisition of global online poker leader PokerStars by Amaya (now known as The Stars Group). The case was dismissed following the prosecution’s improper sharing of more than 300,000 confidential documents with defense lawyers.

Background Information

The purchase of PokerStars by Amaya from its former owner, the Rational Group, cost an astonishing $4.9 billion: a pretty big bill for a company that had previously been known as an obscure vendor of online gaming software and physical slot machines. The news of the deal was therefore greeted with surprise in many quarters, and by the end of June, Amaya’s market capitalization had jumped from about $1 billion at the beginning of the month to around $2.5 billion, with a concomitant increase in its share price. Amaya was at this time headquartered in Montreal and thus subject to Quebec law, although the company has since moved to Toronto.

In March 2016, the securities oversight body of Quebec, the Autorité des marchés financiers (AMF), filed five charges against Baazov related to “trading while in possession of privileged information and influencing or attempting to influence the market price of the securities of Amaya inc.” These infractions were alleged to have occurred between December 2013 and June 2014. Two other individuals and three companies were also charged with related crimes.

AMF Bungling

Throughout the proceedings against David Baazov, the AMF had made a series of errors and mistakes. It took a long time to actually start the trial against Baazov, which only got underway on April 23, 2018: almost two years after the charges were initially filed. Despite this lengthy delay, Baazov’s lawyers said that the AMF had not shared millions of documents with them until September 2017. They claimed that there had not been enough time for the defense to review them before the trial began.

These missteps prompted Baazov’s legal team to request that the case be dismissed twice before. The judge, Salvatore Mascia, denied these requests. However, in explaining his refusal for the second request, he opined, “It was very close at home plate.” Thus, the judge was already doubtful as to whether or not the trial should proceed even before the most recent misstep by the AMF.

Extra Documents Shared

It turns out that more than 300,000 of the documents in question were given to the defense despite the fact that they were confidential and most were not important to the legal proceedings against Baazov. Once it realized the error, the AMF wanted Baazov’s lawyers to just hand the papers back and then continue as if they had never seen them.

This prompted Baazov’s legal team to ask the judge a third time to stay the proceedings. Defense lawyer Sophie Melchers contended that it was impossible to comply with the AMF’s bizarre directive to return the documents and pretend that nothing had happened. She referred to the 1997 movie “Men in Black” wherein a secret government team used a device to wipe the memories of people who had interacted with extraterrestrials. Since no such device is available in real life, she argued, it was impossible to “unscramble the egg.”

The AMF countered by stating that the mistake was made “in good faith” and not on purpose. They claimed that the documents didn’t pertain directly to Baazov, and so the disruption they caused was minor and not enough for the prosecution against him to cease.

About the Judge’s Decision

Judge Mascia ruled against the AMF and ordered that the charges against Baazov and his co-defendants be dropped. In explaining his decision, he commented:

“When the circumstances justify it, the courts must stay the proceedings. This is only to be used in the most dramatic cases. There must be no other acceptable solution that might right the wrongs.. In this case, do the accumulation of mistakes require a stay of proceedings? Yes.”

Reactions to the Decision

Following the dismissal of the charges, Baazov and the two other defendants said in a press release: “We agree with the judge and are happy with the decision.” The AMF, on the other hand, was “obviously very disappointed with the judge’s decision.” The agency is planning to explore the possibility of an appeal.

Future Woes for Baazov?

David Baazov has already seen a certain amount of disruption in his life because of the allegations of insider trading levied against him. He took a leave of absence from Amaya in March 2016 just after the charges were filed. In August that year, he voluntarily left the company, which then replaced him with a new CEO.

Besides the possibility of the charges being reinstated after an appeal, Baazov is the target of several other investigations. There could be separate charges against him in the future. He’s therefore not entirely out of the woods just yet, although he must be glad to have at least won a significant legal victory for now.

Former Amaya CEO

After insider trading charges were made against David Baazov, Amaya’s CEO resigned his position in August 2016, but subsequently made several unsuccessful attempts to buy back his company and take it private. One year later, Amaya distanced itself further from past controversies, including flaunting the UIGEA, by rebranding as The Stars Group, and today PokerStars is a feature of the USA’s regulated online gambling market in New Jersey.

In April, the Stars Group also acquired Sky Betting & Gaming for a massive $4.7 billion, with the move designed to set up the company nicely to make further inroads into the USA’s legal sports betting market.