Carmack v. Amaya Inc.
258 F. Supp. 3d 454
D.N.J.2017Background
- Amaya Inc., a Canadian online gambling company, acquired Oldford Group in June 2014 and later listed on NASDAQ; David Baazov was Amaya’s founder, CEO, and chairman; Daniel Sebag was CFO.
- The Autorité des marchés financiers (AMF) investigated trading around the Oldford acquisition (starting June–Dec 2014 and expanded July 2015); AMF executed search warrants and later obtained a BDR freeze/cease-trading order in March 2016.
- Plaintiffs allege Baazov leaked confidential acquisition information to associates who traded (insider trading) and that Amaya and Baazov made public statements and certifications during May–March 2016 that omitted or misrepresented that misconduct.
- Key company disclosures at issue include press releases (Apr 8, 2015; June 1, 2015; March 2016), Sarbanes‑Oxley certifications in May 2015 and March 2016 filings, and registration statements (May 26 and Nov 10, 2015).
- Plaintiffs assert claims on behalf of purchasers of Amaya securities between May 26, 2015 and March 22, 2016 under: Section 10(b)/Rule 10b‑5, Section 20(a), Section 11 (Securities Act), and Section 15 (Securities Act).
- Procedurally, defendants moved to dismiss; the court denied Amaya’s and Baazov’s motions, and granted in part/denied in part motions brought by Sebag, Gadhia, and Goodson.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Amaya and Baazov made materially false or misleading statements/omissions (10b‑5) | Statements and SOX certifications omitted that Baazov engaged in insider trading and thus were false and misleading | Statements were opinions or truthful; AMF had multiple investigations and disclosures were not knowingly false | Denied as to Amaya and Baazov — pleadings sufficiently allege falsity, materiality, and scienter (Baazov); Amaya imputed Baazov’s scienter |
| Whether Sebag is liable under 10b‑5 (personal scienter and participation) | Sebag signed certifications and participated in filings; received calls from a member of alleged trading ring | Allegations are conclusory and lack particularized facts showing Sebag knew or participated in insider trading | Granted as to Sebag on 10b‑5 — insufficient particularized factual allegations to raise strong inference of scienter |
| Control‑person liability under Section 20(a) / Section 15 (control and culpable participation) | Officers and directors controlled filings and thus are liable as controlling persons | Plaintiffs’ allegations are conclusory; lack facts showing control + culpable participation | Counts II and IV dismissed as to Sebag, Gadhia, and Goodson for failure to plead particularized control/culpable participation |
| Section 11 strict liability for Registration Statement(s) | Plaintiffs bought securities traceable to the registration statements and those statements contained untrue/misleading information | Defendants argue no securities were issued under the referenced registration statements, so Section 11 does not apply | Section 11 claim (Count III) survives — plaintiffs sufficiently allege purchases traceable to the registration statements at pleading stage |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must state plausible entitlement to relief)
- Ashcroft v. Iqbal, 556 U.S. 662 (courts need not accept legal conclusions)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (holistic strong‑inference scienter standard)
- Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 568 U.S. 455 (elements of a Rule 10b‑5 claim)
- Basic Inc. v. Levinson, 485 U.S. 224 (fraud‑on‑the‑market/rebuttable presumption of reliance)
- Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 135 S. Ct. 1318 (when statements of opinion are actionable)
- In re Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256 (Section 11 purchaser‑traceability and pleading standards)
- Frederico v. Home Depot, 507 F.3d 188 (PSLRA heightened pleading specificity for fraud)
- OFI Asset Mgmt. v. Cooper Tire & Rubber, 834 F.3d 481 (PSLRA application in securities cases)
- Belmont v. MB Inv. Partners, Inc., 708 F.3d 470 (imputation of agent scienter to corporation and control‑person principles)