Amaya CEO David Baazov facing insider trading charges

Amaya, the world's largest online gaming company, is facing insider trading charges from Quebec's securities regulator tied to the company's $4.9-billion acquisition of PokerStars and Full Tilt Poker in 2014.

• Amaya Gaming, parent company of PokerStars, probed in Quebec

In total, 23 charges were filed against three companies and three individuals, including five charges for Amaya CEO David Baazov, who has been described by Forbes as "the king of online gaming."

The company is based on Montreal's West Island.

The charges are "very serious" and if proven could carry fines of up to $5 million and five years in prison, said Sylvain Thberge, a spokesperson for the Quebec regulator, known by its French name, the Autorit des marchs financiers (AMF).

Baazov said in a statement the charges are false and that he will vigorously contest them.

In addition, the AMF said Wednesdaythat it had executed search warrants and obtained freeze and cease-trade orders in regards to 13 other individuals tied to mergers and acquisitions involvingAmaya.

Amaya's stock price in Toronto dropped 18 per cent as trading opened Wednesday.

2-year investigation

Thberge saidthe investigation began in June 2014, after Amaya acquired the privately held Oldford Group, the owner of online poker websitesPokerStars and Full Tilt Poker.

The transaction turnedAmaya into the biggest online gambling company in the world.

The securities regulator, with assistance from the RCMP, raided Amaya's offices in Pointe-Clairein December 2014.

The charges relate to "aiding withtrades while in possession of privileged information, influencing or attempting to influence the market price of Amaya, and communicating privileged information," Thberge said.

"We're talking about insider trading."

Also facing charges are the following companies and individuals:

• DioclesCapital Inc.
• SababaConsulting Inc.
• 2374879 Ontario Inc.
• Benjamin Ahdoot.
• Yoel Altman.

Baazov, Amayadenycharges

Baazov responded to the charges in a statement.

"While I am deeply disappointed with the AMF's decision, I am highly confident I will be found innocent of all these charges," he said.

"I have always been proud of my reputation for personal integrity and ethical business conduct."

Amaya issued its own statement responding to the charges and said they are without merit.

The company said the charges involve allegations relating to a former financial advisor to the company and an employee.

"Amaya does not anticipate the charges will have any impact on the management or day-to-day affairs of the operating business," the statement read.

"David Baazov has the full support of the independent members of the board,"Dave Gadhia, Amaya'slead director and independent board member, said in the statement.

Thberge said the companies and individuals charged have 30 days to respond to the charges and file pleas.

'A shame'for shareholders

IndustryanaylystWarwickBartlett, CEO of London-basedGlobal Betting and Gaming consultants, told CBC that the charges could affectAmaya'splans to expand its online offerings.

"I think it's a shame for the company. They've been working hard to introduce sports booking and casino.They've got bigplansfor the EuropeanSoccer Championships this summer," Bartlett said.

"Basically, it's a distraction for the business."

In particular, Bartlettsaid the charges may affect the company's plans to expand into the United States.

Last October Amayagot an online gamblinglicence in the state of New Jersey.

"That's a stepping stone to the rest of the United States, if other states decide to legalize online gambling, especially the bigger states like New York and California," Bartlett said.

"If Baazov was to be found guilty, he might lose his license in New Jersey, which he's only just won."

Baazovstill wants to buy out shareholders

Baazov announced in Februaryhe wantedto buy out shareholders for $21 a share. Hisoffervaluedthe company at $2.8 billion.

Amaya'sboard set up a special committee, headed by Gadhia, to review any concreteproposals brought forward, including any other alternative offers.

Baazovcurrently owns24.6 million common shares of Amaya, representing about 18.6 percent of the outstanding common shares, and has options to buy another 550,000.

In his statement released Wednesday, Baazov said he wanted to proceed with the deal.

"I am still committed to working with my investor group and the Board to consummate a successful transaction," the statement read.

'The king of online gambling'

A glowing profile of 35-year-oldBaazov in Forbesmagazine in December 2014 referred to him as "the king of online gambling."

The profile outlined the rags-to-riches story of Baazov,growing up with conservativeOrthodox Jewish parents who kicked him out of the house at age 16.

It says he was homeless and sleeping on park benches in Montreal for a time before becoming successful in business.

"Baazov's story is an untold saga of chutzpah, luck and pure perseverance," the Forbes profile read.