Germanys Allianz has agreed to pay about $6 billion and its U.S. asset management unit will plead guilty to fraud after a group of its multibillion investment funds collapsed amid market turmoil triggered by the coronavirus pandemic in 2020. The other two portfolio managers - Stephen Bond-Nelson, 51, of Berkeley Heights, New Jersey; and Trevor Taylor, 49, of Miami - agreed to plead guilty to fraud and conspiracy, and cooperate with prosecutors. % of people found this article valuable. To avoid disruptions to these funds and for the protection of the fund investors, the SEC will allow a brief transition period solely to transition these services to another investment adviser. 149 (DLC), Conspiracy to commit securities fraud, investment adviser fraud, and wire fraud, 18 U.S.C. Prosecutors said the managers also inflated fund results to boost their pay through performance fees, with Tournant, 55, collecting $13 million in 2019 and becoming his unit's highest or second-highest-paid employee from 2015 to 2019. Those investors roughly 114 AGI clients who bought into the Structured Alpha funds, worth $11 billion at its peak represented the pension funds of teachers, bus drivers, subway conductors and clergy members and other charity workers across the country, according to the SEC complaint. Think Archegos, Long-Term Capital Management and the hedge funds whose collapse led to the demise of Bear Stearns. According to the allegations in the indictment and the agreement unsealed today in Manhattan federal court: Between 2014 and 2020, Gregoire Tournant, the defendant, was the Chief Investment Officer of a set of private funds at AGI known as the Structured Alpha Funds. As a result, Allianz plans to move about $120 billion of investor assets to Voya Financial Inc (VOYA.N) in exchange for a stake of up to 24% in Voya's investment management unit. Inbounds slide triggered at Snowmass; no one believed to be caught, FAA official: Changes needed at Aspen airport, Roaring Fork Valley Republican aims to unseat Boebert in primary, Mother Lode commercial space sells for $7M, Yogis and city of Aspen sign on the dotted line. And those lower strike prices provided less protection to investors in the event of a short-term market drop.. The Arkansas pension fund makes an initial investment in Allianzs Structured Alpha funds. A spokesman declined to comment. 276 (LTS), Conspiracy to commit securities fraud, investment adviser fraud, and wire, 18 U.S.C. Even when, in 2017, internal auditors uncovered red flags, they assigned product specialists whose pay was tied to the groups performance to follow up. Regulatory filings show that both Greg Tournant and Stephen Bond-Nelson were removed from their positions as managers of Allianz Global Investors Structured Alpha hedge funds in December for 'violation of firm policies designed to ensure compliance with industry regulations and standards relating to the preparation and provision of client communications', and 'violation of firm compliance . Investors were told the funds employed options that included hedges to protect against market crashes, but prosecutors said the fund managers repeatedly failed to buy those hedges. The over-the-counter spreads were so great, they couldnt close positions, said Frenkel, who was chief compliance officer for Innovative Options. Their lawyers declined immediate comment. The transition period will be ten weeks for the US mutual funds that AGI US sub-advises and four months for the US closed-end funds that AGI US advises. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. In the complaint, the SEC describes Tournant as a resident of Miami, Florida except he also is a resident of Basalt, per reports in the Washington Post and The (Colorado Springs) Gazette. "Greg Tournant has been unfairly targeted despite the fact that he was on extendedmedical leave during thesemarket events, and the funds had thrived under his leadership for the previous 14 years. Those funds ultimately collapsed, leading to billions of dollars of investor losses. Chief Executive Officer Oliver Baete expressed regret in February for Structured Alphas losses and said they will have a significant impact on the compensation of its directors. But inside Allianz SE, where a handful of hedge fund managers claimed they could do just that, few grasped how wrong that dream could go. The SEC's complaint, filed in the U.S. District Court in Manhattan, alleges that Structured Alpha's lead portfolio manager, Gregoire P. Tournant, orchestrated the multi-year scheme to mislead investors who invested approximately $11 billion in Structured Alpha. Pensions funds for so many retirees, religious organizations and essential workers from laborers in Alaska, to teachers in Arkansas, to bus drivers and subway conductors here in New York City invested with AGI because they were promised a relatively safe investment with strict risk controls. The fund abandoned the promised hedging strategy and instead began to purchase cheaper hedges that were further out of the money, and therefore less protective in the event of a market crash, according to the indictment. All of the reward, very little risk. NEW YORK/MUNICH, May 17 (Reuters) - Germany's Allianz SE (ALVG.DE) agreed to pay more than $6 billion and its U.S. asset management unit pleaded guilty to criminal securities fraud over the collapse of a group of investment funds early in the COVID-19 pandemic. News on Tuesday that the US unit of the German insurance giant was admitting guilt over the collapse of its Structured Alpha group of hedge funds leaves many questions unanswered, including a big one: Will Mr Tournant, who had told investors Structured Alpha would do well whether markets went up or down, end up in prison? Instead, US authorities say, Greg Tournant sold lies to investors that cost customers, and now Allianz, billions of dollars, and resulted in a guilty plea to federal charges of securities fraud by Allianz Global Investors US. This case is being handled by SDNYs Securities and Commodities Fraud Task Force. Under that oversight, Allianz told CMERS that it had prepared the Funds for "highly unlikely 'what if' scenarios" by "developing mathematically pre-established portfolio As part of the parallel criminal proceeding, AGI US, Taylor and Bond-Nelson have agreed to guilty pleas. Allianz in Februarysetaside $4.1 billion for the disaster, but the final reckoning is still due and could cost plenty more. Listen to free podcasts to get the info you need to solve business challenges! Two of his top lieutenants, Stephen Bond-Nelson and Trevor Taylor, agreed to plead guilty and are cooperating with prosecutors. Allianz agreed to pay more than $6 billion in a settlement with U.S. authorities in May, and the German company's U.S. asset management unit pleaded guilty to securities fraud. At Allianz Global Investors U.S., Tournant and his Structured Alpha team were incentivized to pursue outsized returns. Bond-Nelson pled guilty pursuant to an information before U.S. District Judge Paul A. Engelmayer on March 3. Those investors included pension funds for teachers, clergy, bus drivers, engineers and others, the vast majority of whom live and work in the United States.. Prosecutors say that although Mr Tournant assured big investors safety was his top priority, he secretly took huge, undisclosed risks. Gregoire Tournant, the former chief investment officer who created the now-defunct Structured Alpha Funds, accused the law firm Sullivan & Cromwell of helping Allianz, also a client, make him. Taylor and Bond-Nelson have agreed to the entry of partial judgments against them in which they consent to injunctive relief with monetary relief to be determined by the court in the future. %PDF-1.5 Its every investors dream: Make money when markets go up, and when markets go down, and even when markets go practically nowhere. The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs. Williams said the fine was significantly reduced because of Allianz's compensation to investors. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Investors allege Allianz and Structured Alpha abandoned risk controls and turned a challenging situation into a disaster by doubling down on a bad strategy. In addition, the complaint seeks an officer and director bar against Tournant. Editing by Chizu Nomiyama, Tomasz Janowski and Matthew Lewis, US arrests two for setting up Chinese 'secret police station' in New York, UBS makes changes to buyback programme following Credit Suisse takeover, HSBC shareholder Ping An to vote for bank's break-up at annual meeting -source, US financial institutions hit by deposit flight as clients seek higher returns, Nissan unveils new EV for China as it aims to up game in no. Marketing material describes the funds as a tested & proven solution and consistently above target. They are marketed as a confident strategy with an insurance spirit.. In the finger-pointing that followed, some big investors accused the professional consultants they had hired to vet Structured Alpha of ignoring red flags and failing to understand what the funds were doing, according to lawsuits. The demise of the Structured Alpha funds is just the latest illustration of the outsized damage an obscure trading operation can wreak on an A-list financial institution. Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile. But inside Allianz SE, where a handful of hedge fund managers claimed they could do just that, few grasped how wrong that dream could go. Alpha Matheseos Arithmetica Theorica & Practica (in Latin), Vilnius, 1733.jpg 500 820; 118 KB Basas sirdies pas Pona Diewa Szwciausy Marya Panna yr szwntus danguy karalaujencius, szaukancios par giesmes (in Lithuanian language) by Prancikus rubauskis, Vilnius, 1790.jpg 1,002 1,433; 269 KB Postal Inspection Service also announced today a plea agreement (the agreement) pursuant to which AGI will plead guilty to securities fraud in connection with this fraudulent scheme, and pay more than $3 billion in restitution to the victims of this fraud, pay a criminal fine of approximately $2.3 billion, and forfeit approximately $463 million to the government. U.S. Attorney Damian Williams for the Southern District of New York and Inspector-in-Charge Daniel B. Brubaker of the New York Office of the U.S. But Tuesdays indictments are indicative of a harder line from the Justice Department regarding high-level fraud schemes. Arkansas Structured Alpha holdings reach a market value of $1.6 billion at the end of 2019, a significant portion of the $18.3 billion fund. The industry leader for online information for tax, accounting and finance professionals. At one point, Mr Tournant met Mr Taylor at a vacant construction site, where they discussed fund reports they manipulated and how to respond to SEC investigators, according to the SEC complaint. Instead of laddering with strike distances from -10% to -25% as represented to investors, the portfolio management team, at Tournants direction, generally purchased cheaper put options with significantly lower strike prices, the SEC complaint notes. 78j(b) & 78ff (Count Two), Investment adviser fraud, 15 U.S.C. All structured data from the file namespace is available under the Creative Commons CC0 License; all unstructured text is available under the Creative Commons Attribution-ShareAlike License; additional terms may apply. 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