Allegations of insider trading and money laundering made against Amaya CEO David Baazov may be having a negative effect on PokerStars´ tribal partners.
For years, the issue of allowing “bad actors” to participate in a regulated online gambling market has been one of the main sticking points preventing the progress of regulated online poker in California. More recently, industry observers have expressed the opinion that some tribes are relaxing their opposition to PokerStars´ participation in a regulated market. This certainly appeared to be the case when the previously neutral United Auburn Indian Community decided to join the PokerStars-led coalition last month.
However, it has been reported that other tribes within the PokerStars coalition now have concerns about the integrity of PokerStars´ parent company – Amaya Gaming. The concerns are based on allegations of insider trading by the company´s CEO David Baazov and unsubstantiated reports that the company was named in the “Panama Papers” – a series of documents revealing high-profile clients of a Panamanian law firm that had avoided paying tax and laundered money through offshore companies.
Allegations Denied as Baazov Takes leave of Absence
The allegations of insider trading were made last month by Quebec’s securities regulator, Autorité des Marchés Financiers (AMF), following an eighteen-month investigation into the steep rise of Amaya´s share price just prior to its cash-and-stock $3.8 billion takeover of PokerStars and Full Tilt Poker in June 2014. The AMF has charged Baazov and two of his close associates – Benjamin Ahdoot and Yoel Altman – with insider trading and the improper influencing of a stock price.
All three individuals deny the allegations made against them, and David Baazov has taken voluntary leave from his position as CEO of Amaya Gaming in order to
avoid distraction for the company and its management while I vigorously contest all allegations made against me. A statement was also issued by Amaya Gaming denying that the company or its officials had any association with the Mossack Fonseca clients accused of money-laundering in the Panama Papers.
However the Damage Appears to Have Already been Done
Despite the denials of the allegations there already appears to be fractures appearing in the PokerStars coalition according to Dave Palermo writing at pechanga.net. Palermo reports that Lynn Valbuena – Chair of the San Manuel Band of Mission Indians and formerly one of PokerStars´ staunchest supporters – expressed her tribe´s
deep concerns about these latest Amaya revelations. She told delegates at a meeting of tribal leaders and lobbyists that the San Manuel council is looking into the allegations and their implications.
Two pro-regulation lobbyists also expressed their concerns about the allegations. Robyn Black – a lobbyist for the thoroughbred racing industry – told Palermo:
We were making progress and the whole Amaya thing, with the CEO, kind of threw everybody back.
David Quintana – the Legislative Director for the California Nations Indian Gaming Association and founder of the California Tribal Business Alliance – added:
Before all these new allegations getting iPoker legalized was not a done deal, not by a long shot. Now they [Amaya/PokerStars] are even dirtier than we thought they were.
The Implications for Online Poker in California
The implications for online poker are that, in order to get any legislation passed, it may now be necessary to include a “bad actor” clause in Adam Gray´s proposals. The subsequent exclusion of PokerStars from online poker in California would not be a popular move as far as players are concerned – players that are already unhappy with the “terrible proposals” that would see playing online poker at unregulated sites during the implementation of regulation classified as a felony.
However, the exclusion of PokerStars would be welcomed by several operators (although possibly not publicly) and a number of tribes fearful of the competition. It would allow companies such as Caesars and 888Poker to grab a larger share of the market, and possibly allow for some of the smaller online poker sites to get a foothold in a marketplace estimated to be worth around $300 million a year. Without PokerStars, it has been speculated that the Californian online poker market could sustain three or four unique poker networks.
Rumored Hearing into Online Poker Bill
We will see how much damage the Amaya allegations have actually caused should a rumored hearing into an amended online poker bill take place later this month. Steve Stallings – Chairman of the California Nations Indian Gaming Association – yesterday told cardplayer.com that the hearing has the goal of moving Adam Gray´s “Internet Poker Consumer Protection Act of 2016” (AB2863) out of the committee stage and onto the floor of the Assembly.
Stallings admitted that the allegations of insider trading and money laundering raised
issues of corporate governance, but declined to comment on one of the other main sticking points for regulated online poker in California – the participation of the racetracks. The current proposals include a $60 million “bribe” for the horseracing industry to step away from online poker. It is not a situation that neither tribal coalitions nor the horseracing industry are entirely happy with, but is likely to be overshadowed (if the rumored hearing takes place) by the Amaya allegations and a potential shift of allegiance by tribes in the PokerStars-led coalition.