Steve Ruddock Baazov charges CA online poker impact

On Wednesday morning the Canadian regulatory body, the Autorité des marchés financiers (AMF), announced it has charged three companies and three individuals with insider trading stemming from the investigation into the purchase of Oldford Group (PokerStars) by Amaya Gaming in 2014.

The investigation by the AMF first came to light in December of 2014.

Among those named by the AMF is Amaya Gaming CEO David Baazov, who was hit with five separate charges, including, “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.”

The AMF press release states:

“Based on the AMF’s investigation, the respondents are alleged in particular to have used, between December 2013 and June 2014, privileged information pertaining to the securities of Amaya inc. for trading purposes. As well, a few of the respondents are alleged to have conspired to commit some of the offences.

‘We have made suppressing illegal insider trading and market manipulation a top priority, as this type of conduct profoundly affects public confidence and the integrity of our markets,’ said AMF President and CEO Louis Morisset.”

The press release concludes by saying the investigation is still ongoing and more charges could still be filed.

In the wake of the news the company’s stock price has dropped well over 20 percent, although trading has been a bit up and down for the day, and the stock is up from its opening price.

Making matters worse, the news will likely have negative implications for online poker in California.

Baazov denies any wrongdoing

In a statement David Baazov said of the charges, “These allegations are false and I intend to vigorously contest these accusations. While I am deeply disappointed with the AMF’s decision, I am highly confident I will be found innocent of all charges.”

The company is also publicly standing behind its CEO, as Dave Gadhia, Amaya’s lead director and an independent board member said, “David Baazov has the full support of the independent members of the board.”

Pechanga coalition has pointed to investigation in the past

The investigation itself has been noted multiple times by PokerStars’ California detractors (a coalition of tribes led by the Pechanga and Agua Caliente), and with charges now filed, it would be surprising if these new developments weren’t leveraged by the coalition as it continues to push for the state to include bad actor language that would prohibit PokerStars from receiving a license if online poker is legalized in the Golden State.

The AMF investigation was a key component of an attack ad against PokerStars by the Viejas tribe in 2015. It was also mentioned at hearings and in communications between tribes and the legislature discussing the potential legalization of online poker in California.

With today’s news, critics now have a lot of leverage as they can simply say, “See, we told you all along they weren’t suitable for licensure.”

Impact on California online poker efforts

This is quite unfortunate, as California has made considerable progress this year on one of the two core issues that has kept the state from passing an online poker bill: how to deal with the horse racing industry (that story can be found here).

The other issue that has been a thorn in the side for online poker advocates is the inclusion of bad actor clauses that would prevent certain companies (namely PokerStars) from applying for a license. The push for bad actor clauses had lost a lot of its momentum over the past year, as more and more tribes softened their stance on the issue due to changing dynamics surrounding PokerStars.

The sale of PokerStars to Amaya, and the licensure of PokerStars by the New Jersey Division of Gaming Enforcement, were supposed to make bad actor clauses a non-issue, but today’s news will likely thrust it back onto center stage for an encore performance. It will likely also embolden the remaining proponents of bad actor language to continue their hardliner approach.

Quite frankly, today’s news has likely set online poker legalization in California back several steps, as the state continues to play the role of Charlie Brown with online poker being the football.

Potential silver lining?

Since I’m ever the optimist, I do see a way that the current situation could lead to a compromise on the very prickly bad actor issue. It’s a slim possibility, but a possibility nonetheless.

The potential scenario I envision is that the two sides could come to an agreement on a bad actor (lite) clause that stipulates something along the lines of: Should Baazov be cleared of all insider trading charges, PokerStars would be allowed to apply for a license.

This stipulation would likely give PokerStars potential competitors in the California online poker market a head start while the case plays out, not unlike what the company went through in New Jersey.

All that being said, this is complete speculation, as I’m not sure either side would agree to that.

Steve Ruddock
Steve Ruddock - Steve is one of the most recognizable names in the online poker media space. He brings his deep knowledge and equally deep well of opinions to his coverage at CaliforniaOnlinePoker.com.