Allianz pleads guilty to securities fraud; will pay $6B in penalties

By Sakina Raj  | Date: 2022-05-19

Allianz pleads guilty to securities fraud; will pay $6B in penalties

U.S. asset management unit of Allianz SE has reportedly pleaded guilty to securities fraud over a massive investor fund collapse early in the COVID-19 pandemic and agreed to pay more than $6 billion in penalties.

The German financial services firm’s settlements with the U.S. Securities and Exchange Commission and the U.S. Department of Justice are one of the largest in corporate history.

The Structured Alpha funds, once with assets worth $11 billion under management, lost over $7 billion as the pandemic adversely impacted markets in February and March 2020.

Gregoire Tournant, the Structured Alpha funds’ former chief investment officer, was indicted for conspiracy, fraud, and obstruction. Meanwhile, two more former portfolio managers have taken related guilty pleas.

Allianz Global Investors U.S. LLC was charged with the crime of misleading pension funds for bus drivers, teachers, and others. Damian Williams, U.S. Attorney in Manhattan, has reportedly stated that more than 100,000 investors were impacted by this criminal securities fraud.

According to prosecutors, managers inflated the fund results to increase their pay via performance fees, with Tournant collecting around $13 million in 2019.

The investigators also revealed that the misrepresentations started in 2014, which helped Allianz generate above $400 million of net profit.

The settlement calls for the German financial services provider to pay a criminal fine of $2.33 billion, offer restitution of $3.24 billion, and forfeit $463 million, as per court papers.

In addition, Allianz has also accepted a civil fine of $675 million from the SEC, becoming one of the regulator's largest penalties since WorldCom Inc. and Enron Corp. imploded two decades back.

The guilty plea supposedly carries a ten-year ban on Allianz Global Investors to provide advisory services to investment funds registered in the U.S.

Consequently, Allianz is planning to move nearly $120 billion of the investor assets to Voya Financial Inc. in exchange for up to a 24% stake in its investment management unit. It is expected to reach a final agreement over the coming weeks.

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Sakina Raj

Sakina Raj

Armed with a degree in English Literature, Sakina chose to explore the world of content writing and pursue it as a career. Sakina has been playing with words for over five years now and currently pens down articles relating to diverse domains for BonafideNews and vari...

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