Germany-based Allianz agreed to a settlement Tuesday with the U.S. Securities and Exchange Commission requiring the firm pay roughly $6 billion in restitution, penalties and disgorgement for a fraudulent complex options trading strategy that collapsed amid the pandemic.
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The SEC also announced that Allianz Global Investors U.S. LLC, the company’s U.S. asset management unit, and two managers will plead guilty to fraud in connection to a related case with the U.S. Department of Justice, after the multibillion-dollar investment funds called “Structured Alpha” folded amid market volatility in 2020.
In the parallel criminal proceeding, the U.S. Attorney’s Office for the Southern District of New York is bringing criminal charges against AGI US, lead portfolio manager Gregoire P. Tournant, co-lead portfolio manager Trevor L. Taylor, and portfolio manager Stephen G. Bond-Nelson. According to the announcement, all but Tournant have agreed to guilty pleas.
AGI US admitted to marketing and selling the strategy to approximately 114 institutional investors, including pension funds for teachers, clergy, bus drivers, engineers, and other individuals, the SEC highlighted.
“Allianz Global Investors admitted to defrauding investors over multiple years, concealing losses and downside risks of a complex strategy, and failing to implement key risk controls,” SEC Chair Gary Gensler, shared in Tuesday’s announcement.
“The victims of this misconduct include teachers, clergy, bus drivers, and engineers, whose pensions are invested in institutional funds to support their retirement,” Gensler said. “This case once again demonstrates that even the most sophisticated institutional investors, like pension funds, can become victims of wrongdoing.”
AGI US has agreed to pay more than $1 billion to settle the SEC’s civil claims and together with its parent, Allianz SE, over $5 billion in restitution to victims, the SEC stated. AGI US also agreed to a cease-and-desist order, a censure and payment of $315.2 million in disgorgement, $34 million in prejudgment interest, and a $675 million civil penalty, some of which will be distributed to investors, the SEC noted The regulatory agency also said the disgorgement and prejudgment interest will be deemed satisfied by amounts paid to the DOJ.
The SEC’s complaint alleges that Tournant worked with Taylor and Bond-Nelson to orchestrate the years-long scheme to mislead investors who invested approximately $11 billion in Structured Alpha and paid more than $550 million in fees.
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Source: https://www.law360.com/articles/1494094/allianz-to-pay-6b-to-settle-securities-fraud-cases-with-feds
