Regulators have identified about 300 investors who pocketed huge gains by acquiring large volumes of Amaya Inc. securities months ahead of its $4.9-billion deal last summer to buy the world's largest online gambling company, PokerStars.
The Financial Industry Regulatory Authority, FINRA, sent a notice to Amaya in December requiring company officials to answer questionnaires about possible connections to the long list of investors who bought the company's stock, or options to buy shares, ahead of the deal, according to people familiar with the request. About a half dozen law firms and banks that advised Amaya during takeover negotiations were asked to answer similar questions.
The list is believed to be the largest group of investors ever singled out by regulators for inquiries, the latest sign that the Amaya investigation is shaping into one of Canada's largest and most complex trading probes.
Regulators often review large lucky trades ahead of market-moving news, but these lists seldom number more than a few dozen. Those familiar with FINRA's list said it includes the names of many prominent Canadian brokers, money managers, hedge funds and business executives. A number of the buyers were numbered or shell companies sometimes used by investors to hold securities.
"I've never seen a list like this before," said one person who has read the document.
FINRA is a Washington-based market regulator that oversees trading and other activities in U.S. markets. Montreal-based Amaya is listed on the Toronto Stock Exchange and its stock also trades on the U.S. over-the-counter market.
Unusual trading in the gambling company's stock has already triggered an insider trading investigation by Quebec's Autorité des marchés financiers (AMF). In December, police executed search warrants on behalf of the AMF for documents from Amaya, its lead investment bank Canaccord Genuity Group Inc. and a Montreal brokerage office of Manulife Financial Corp.
FINRA's identification of investors does not imply any wrongdoing or that the individuals named are the subject of an investigation. Typically, regulators trace relationships between investors, company insiders and advisers to determine potential access to such lucrative confidential information as a pending takeover bid. If FINRA identifies improper conduct, it typically passes the information to the U.S. Securities and Exchange Commission, which often co-operates with Canadian regulators.
One of the investors identified by FINRA is Ben Cheng, president of Toronto asset management firm Aston Hill Financial Inc., which acquired a major stake in Amaya through its subsidiary Aston Hill Asset Management a few months before the PokerStars acquisition.
In an e-mail to The Globe and Mail, Mr. Cheng said he has not purchased Amaya stock. "I have never "personally [directly or indirectly] owned any shares in Amaya in the past."
Eric Tremblay, Aston Hill's chief executive, said the firm has not been contacted by regulators in connection with the Amaya investigation. "I'm not aware of any list.… We are unaware of any investigation," he said.
In a statement, Amaya said it is co-operating with regulators.
"It is routine and a matter of course for regulators including in the U.S. to submit requests for information following [a merger]," the company said.
"We fully anticipate such requests and have received them multiple times following previous acquisitions in past years. With such requests, our policy is and always has been to fully co-operate with regulatory authorities. In the case of our acquisition of [PokerStars], we have followed that policy.
"We have been providing information continuously since the time of the transaction announcement and we will continue to do so, if and as requested. Such requests for information do not necessarily lead to an investigation. The only investigation we are aware of is by the AMF, into trading activities in Amaya securities surrounding the [PokerStars] acquisition."
If trading in Amaya's stock ahead the of the takeover announcement is any indication, the news was one of the worst-kept secrets in recent deal history. According to regulatory filings, Amaya entered exclusive discussions in January, 2014, with the British-based Scheinberg family, which owned PokerStars. Over the next few months, Amaya hired bankers and law firms to advise it on how to structure an audacious bid that would see a small, four-year-old company finance the purchase of a competitor several times its size by selling more than $3-billion in stock and debt securities.
Amaya's financial advisers included Canaccord Genuity, Deutsche Bank, BlackRock Financial Management Inc. and GSO Capital. Its legal advisers were Osler Hoskin & Harcourt in Canada and Greenberg Traurig and Fox Rothschild in the United States.
For the first three months of takeover talks in 2014, Amaya's stock hovered around $7 a share and an average of 235,000 shares traded daily on the Toronto Stock Exchange. As talks moved closer to the finish line, the stock price and trading volumes skyrocketed. In the three months before the June 12 announcement of the deal, Amaya's stock price doubled to more than $14, and average daily-trading volumes soared to 482,000. By the end of November, the stock had catapulted to nearly $39 a share, a more than five-fold increase in price from early 2014.
(Editor's note: An earlier online version of this story incorrectly identified GSO Capital as an affiliate of BlackRock Financial Management. In fact, GSO is an affiliate of BlackStone Group.)