US watchdog eyes 300 investors who profited from Amaya’s PokerStars deal

amaya-finra-investigation-baazov-300A US financial industry watchdog is investigating Amaya Gaming’s purchase of PokerStars in an effort to learn who may have profited from advance knowledge of the $4.9b deal.

On Tuesday, Canada’s Globe & Mail newspaper printed a front-page story detailing a probe by the Financial Industry Regulatory Authority Inc. (FINRA) – a US-based self-regulatory body that oversees brokerage firms and exchange markets – into some 300 investors who made “huge gains” buying “large volumes” of Amaya stock prior to the company’s announcement last June that it was purchasing PokerStars’ parent company, the Rational Group. was the first to break the news that Amaya and PokerStars were discussing a deal, which prompted Amaya to issue a note to the markets two days later. The stock had enjoyed a significant rise over the preceding weeks, suggesting certain insiders understood that a major deal was imminent.

The Globe said FINRA’s 300-strong list of profiteers was “believed to be the largest group of investors ever singled out for investigation by regulators for inquiries.” Traditional investigations of this type generally involve no more than a few dozen trades. The Globe claimed FINRA’s list included “many prominent Canadian brokers, money managers, hedge funds and business executives,” plus other numbered or shell companies. A Globe source said they’d “never seen a list like this before.”

FINRA’s investigation is separate from the insider trading investigation launched in December by Autorité des Marchés Financiers (AMF), Quebec’s financial market watchdog. That probe targeted Amaya, Canadian investment bank Canaccord Genuity and the Montreal brokerage office of Manulife Financial Group.

The Montreal-based Amaya issued a statement saying it was cooperating with FINRA’s “requests for information.” Amaya said such requests were “routine and a matter of course for regulators including in the US … following a merger.” Amaya said these requests “do not necessarily lead to an investigation” and that the only current investigation Amaya was aware of was the AMF’s.

Routine or not, this is not the kind of publicity Amaya would like just now. Amaya is believed to be in the final stages of investigation by online gambling regulators in New Jersey and is also desperately trying to convince California that its acquisition of the Rational Group has expunged PokerStars’ alleged ‘bad actor’ taint.

Amaya is also believed to be aligning itself with Canada’s provincial gambling monopolies in some as yet undetermined online partnership. Such a move would presumably offer some legal cover to PokerStars’ existing Canada-facing business, which the provincial monopolies view as (a) illegal and (b) responsible for the poor showing of their own online poker operations. Should either Amaya probe expand into a full-blown criminal investigation, Amaya could find life difficult on both sides of the 49th parallel.