The SEC Is Probing Possible Insider Trading Prior to Montreign Casino’s Licensing

The Securities and Exchange Commission is probing whether trading in shares of Empire Resorts Inc. around the time the company received a lucrative casino license involves insider trading. Empire Resorts received a license for the Montreign Casino near Monticello on December 17, 2014.

The SEC probe looked into suspicious trading activity in the days just prior to the announcement of the license. Trading of Empire Resorts spiked in the days before the announcement that the company would receive one of 3 casino licenses awarded in December 2014.

The investigation throws into question how people might have known that a license was about to be awarded to Empire Resorts. While the local New York develop groups involved people who are well-known in their part of the states, they were considered dark horses when compared with the multinational conglomerates they were competing against for licenses. New York went in the opposite direction that recent licensing processes went in Massachusetts and Maryland, which favored brand name Las Vegas companies like Wynn Resorts, MGM Resorts, and Caesars Entertainment.

Gaming Facility Location Board

The New York Gaming Commission appointed a 5-member Gaming Facility Location Board to decide on the 2014 licensing process. The siting panel was told they could award up to 4 licenses in 3 distinct regions of New York, with no more than 2 licenses in any region. When it was time to submit license applications, a total of 16 different casino companies and real estate developers submitted applications.

Among those companies were Caesars Entertainment and Mohegan Sun, who represent significant players in the United States gaming market. Genting Limited, a Malaysian multinational conglomerate, also submitted an application. Genting has tremendous resources owing to its oil platforms and rubber plantations in Southeast Asia, so it is building the most expensive casino in the history of Las Vegas: the $4.2 billion Resorts World Las Vegas.

Empire Resorts’s Suprising Victory

Despite such competition, Empire Resorts Inc. won the licensing process with a smaller bid than many competitors. The trading spike was enough to alarm SEC officials, who monitor such investments during times when insider trading might occur.

An anonymous official in Gov. Andrew Cuomo’s government in Albany told the New York Post that the trading volume immediately raised suspicions. The official said, “The SEC was investigating it within two days of what had occurred. It got them very suspicious.”

Trading Increased Threefold

According to NASDAQ figures, trading rose from 31,132 shares on December 12 to 82,495 shares on December 16. The price of Empire Resorts stock rose from $32 to $40 in that time. The trade of Empire’s shares skyrocketed to 443,883 shares on December 17, the day the license was awarded. That would be expected, though share prices actually fell below $36 a share, due to the previous volume of trading.

Empire’s largest stakeholder is K.T. Lim, the chairman of Genting. Empire was the only publicly traded company among the firms awarded a license on December 17, 2014.

Comparisons to Other Applicants

Of the other 5 publicly traded companies among the group of 16 applicants, trading volume was relatively flat in the days preceeding the license announcements.

Robert Heim, a security attorney who once worked for the Securities and Exchange Commission as an assistant regional director, said the volume immediately would have alarmed officials. Heim said, “This type of unusual activity in the stock’s trading pattern can indicate possible insider trading occurred.”

FBI Probe of Location Board

The Federal Bureau of Investigation also opened a case on the Empire Resorts trading in 2015. The FBI wanted to know how the location board’s process worked and who might have known about the upcoming licensing decision before it was revealed to the public.

A source inside the casino industry told the NY Post, “He [the FBI offical] asked about Empire and was looking into whether there was anything in casino procurements. The spike in trading at the time came up.”

Statements from Other Offices

When contacted by the New York Post, the office of US Attorney Preet Bharara declined comment. The office of Gov. Cuomo gave a statement which said they had not been contacted about the allegations. Elkan Abramowitz, an attorney for Andrew Cuomo, said, “No one came to visit us and the SEC has not contacted us.”

An official from the New York State Gaming Commission defended the actions of his commission and the location board. Lee Park, a spokesman for the New York Gaming Commission, said the licensing process “has been conducted with 100 percent transparency and the utmost integrity.”