Earlier this year in March, insider trading charges leveled against David Baazov were unsealed, prompting a voluntary leave of absence from his positions as CEO and chairman of the board. Last week, he issued a statement formally resigning all positions as the investigation continues, which came as a surprise to some. His initial leave of absence was only supposed to be temporary, with Rafi Ashkenazi appointed as the interim CEO. With Baazov’s announcement, Ashkenazi is now tracking to become the new permanent chief executive.
David Baazov is charged with using privileged information while trading shares of Amaya Inc. between December 2013 and June 2014. Upon announcing his departure, he issued the following statement: “I am proud of my contributions in building Amaya into the successful company it is today, and continue to be supportive of its strategy and management.”
Amaya acquired PokerStars in June 2014, which is the tail end of the time Baazov has been charged for insider trading. When Amaya bought PokerStars, the company was already a successful but underrated online software developer looking to add undervalued brands to their portfolio. While PokerStars had been one of the top names responsible for the online gambling spike over the last decade, Amaya believed that they could turn PokerStars into something even more profitable over the long term.
Baazov’s announcement coincides with PokerStars’ second quarter earnings statement, which was less-than-stellar. Amaya’s online poker revenue has flatlined after a sharp drop over the past year, while the overall company revenue is only up 10 percent. In 2015, poker revenues dropped from 90 percent of PokerStars’ income to 75 percent earlier this year, and earnings from the first quarter showed another 11 percent drop.
That being said, Amaya still controls roughly 70 percent of the global legal online poker market. It seems that, in spite of its problems, players still prefer and trust the familiarity and brand recognition that comes with the PokerStars name.
Baazov’s Legal Troubles Used Against PokerStars
PokerStars is in the midst of a campaign to gain a foothold in the California online poker market. The company is having to go to serious lengths with lobbying efforts and behind-the-scenes deals in the hopes of making this happen, however. They are experiencing considerable pushback on their efforts to enter the California market due to what’s known as “bad actor” accusations. These accusations stem from the fact that PokerStars continued to operate in the US for another five years after the UIGEA was passed, resulting in a battle with the US government that ended in a $700 million settlement and no formal charges.
Neither Amaya nor David Baazov had any connection to PokerStars during that timeframe, but the tribes and other detractors of the legislations claim that PokerStars will still have an unfair advantage in the market because of the time they spent operating illegally. The passage of online gambling legislation in California and Pennsylvania is a hotly debated topic right now. This means that detractors, namely the tribes that have brick-and-mortar casinos, will take any opportunity they can to run PokerStars through the mud in hopes of gaining an edge.
In April 2016, the California tribes that oppose PokerStars‘ entry into the online poker market made a point to bring up the charges Baazov is facing during a hearing about bad actor claims. This leads to speculation that his resignation is intended to help Amaya as a company move forward. His announcement may also help boost Amaya’s reputation and make it easier for the company to slide into the online poker market once legislation is passed.