How Will Baazov Charges Impact PokerStars in California?

David BaazovThis is supposed to be a banner month for PokerStars as it successfully returned to the U.S. market. The company had a successful soft launch period and then opened for the general public on March 21. They immediately started ascending to the top of the NJ iPoker market.

However, things quickly changed this week after the announcement that CEO David Baazov is facing charges of insider trading in connection with the sale of PokerStars to the Amaya Gaming Group in 2014. This has forced Baazov to temporarily step down from his position while he fights the allegations and supposedly works on his bid to buy Amaya.

Questions have begun to swirl since the Baazov indictment, questions that could impact the ability for PokerStars to return to the California market. Is the recent Baazov news a mere inconvenience or will it be used to slow PokerStars’ march into other states?

Overlooked Announcement Raises Further Questions on Baazov’s Role

In Tuesday’s press release from Amaya, there was a section regarding the investigation that we’ve seen little coverage on. The following was under the section entitled “AMF Update:”

On March 23, 2016, Amaya announced that the AMF had charged Mr. Baazov with aiding with trades while in possession of privileged information, influencing or attempting to influence the market price of securities of Amaya and communicating privileged information.

Subsequent to that announcement, the Board became aware of a decision of the Bureau de Decision et de Revision, the administrative tribunal in Quebec that hears certain AMF applications, which disclosed additional AMF investigations into the alleged conduct of Mr. Baazov and others which are beyond the scope of the charges and of the internal investigation referred to in Amaya’s March 23rd announcement. While none of these allegations have been proven, the Board takes them seriously and has expanded the mandate of the Special Committee to investigate these additional matters.

Additional allegations that have prompted Amaya to expand the scope of the Special Committee? That doesn’t sound good. Also, notice how that Amaya did not make any statements about how they felt that Mr. Baazov would be exonerated of these new allegations?

Has Amaya become concerned over these new allegations or is this merely the company covering their bases and choosing to take a more neutral stance. Time will tell.

What Happens if Baazov is Convicted?

The biggest question on everyone’s mind is what happens if Baazov if convicted of insider trading? There is already speculation that anti-PokerStars activists could use the indictment as fodder to block the company, but a conviction would almost prove the Pechanga Coalition correct.

The coalition has accused PokerStars of underhanded business practices in the past and a conviction of insider trading by its CEO would be the ultimate confirmation of their worst fears. While we are not trying to be conspiracy theorist, we can make an educated guess based on the past history surrounding the issue.

If Baazov is convicted, we’d bet against PokerStars being allowed in California anytime in the near future. We could even see a quick dissolution of the PokerStars Coalition as casinos and tribes try to distance themselves. Of course, this is all speculation and our hopes are that Mr. Baazov proves these allegations false.

New Jersey Investigation Could Be Cause for Optimism

While the potential charges against Baazov are ominous, there’s some hope for optimism provided that the New Jersey Division of Gaming Enforcement truly investigated all angles. Remember that the DGE issued a license to PokerStars after over a year’s worth of investigation into the PokerStars sale to Amaya.

It would seem logical that any legitimate issues surrounding insider trading would have been picked up on by the DGE and that they would not have issued a license. Our reasoning behind this simple. Why would the DGE risk licensing a company that they believed that the CEO was guilty of insider trading? Based on their investigation and conditions placed upon Amaya for operating in New Jersey, it would seem unlikely.

Rather, we speculate that the DGE knew that charges were coming but their investigation revealed what Amaya and Baazov have claimed, meaning that they are without merit.

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