According to an initial report by Bloomberg, the trio used to manage the Structured Alpha funds, but all left the company in December 2021, per company filings. Instead of employing the usual formula for hedge-fund fees the 2 and 20 mix of management charges and a cut of profits they were compensated for one thing alone: performance. Megan Tackett is the editor for the Aspen Daily News. Gregoire Tournant, the former chief investment officer who created and oversaw the now-defunct Structured Alpha funds, was also indicted for fraud, conspiracy and obstruction, while two other . Exclusive news, data and analytics for financial market professionals, Reporting by Jody Godoy The Department stands ready to keep bringing these kinds of charges to assure the public thatno one is above the law.. induced market dislocation of March 2020," Tournant's counsel, Seth Levine and Daniel Alonso, said in a joint statement on behalf of their client, who they say also had investment in the fund. New York City | He was a hedge fund manager supposedly under the watchful eye of a master cop an Allianz unit that policed his every move. "From at least January 2016 through March 2020, the defendants lied about nearly every aspect of a highly complex investment strategy they marketed to institutional investors, including pension funds managing the retirement savings of everyday Americans. 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. In March 2020, following the onset of market dislocations brought on by the COVID-19 pandemic, the funds lost in excess of $7 billion in market value, including over $3.2 billion in principal, faced margin calls and redemption requests, and ultimately were shut down. Investors lost billions of dollars, the SEC complaint details. %PDF-1.5 As the introductory phrase signifies, the entirety of the text of the indictment and the description of the indictment set forth in this release constitute only allegations, and every fact described should be treated as an allegation. (Reporting by Tom Sims; editing by Tomasz Janowski). Be the first to know what's happening as it's happening. All these months later, the big question remains: How could a few obscure money managers people on no ones list of hedge-fund luminaries blow such a huge hole in Allianz, which traces its history to the days of Bismarck? Allianz Global Investors US LLC was accused of misleading pension funds for teachers, bus drivers, engineers, religious groups and others by understating the funds' risks, and having "significant gaps" in its oversight. "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. Roman Frenkel was a first-hand witness to the Structured Alpha teams earlier failure when he worked at Innovative Options Management, the small Miami firm that Taylor founded and Tournant helped run briefly while continuing to manage money for Allianz. See here for a complete list of exchanges and delays. Greg Byrd "Linas was in my C programming class (ECE 209) at NC State University. The industry leader for online information for tax, accounting and finance professionals. In another example, defendants smoothed performance data sent to investors by reducing losses on one day from negative 18.2607085709004% to negative 9.2607085709004% -- this time by cutting the number 18 in half. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Copyright 2022 Bloomberg. A conference has been scheduled for today at 3:00 p.m. before U.S. District Court Judge Loretta A. Preska, at which time AGI is expected to plead guilty to an information pursuant to the agreement. Tournant surrendered to Postal Inspectors in Denver, Colorado, this morning and is expected to be presented later today. Get Free Insurance Industry News Updates Delivered to Your Email! Tournant touted the protections provided by the funds position within the global Allianz corporate structure, calling Allianz a master cop that would ensure that Tournant followed the risk guidelines promised to investors. Required fields are marked *. Investing in Structured Alpha, Mr Tournant assured investors, was very, very different than if I had my own hedge fund firm where in some form or fashion I can overrule just about anything. The U.S.-French citizen appeared briefly in Denver federal court, and was released after agreeing to post a $20 million bond. And when the storm came in March 2020, when the COVID-19 crash hit, these investors got soaked and lost billions. There was a problem saving your notification. Bond-Nelson, at Tournant's direction, also lied to Allianz's in-house lawyers after the company learned about the altered reports and the SEC probe, prosecutors added. 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. I would enthusiastically recommend him for any computer engineering position." document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Grocery Chain Accuses Chubb of Lowballing, Fla. 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While they were able to solicit over $11 billion in investments by the end of 2019 and earn over $550 million in fees as a result of their lies, they lost over $5 billion in investor funds when the market volatility of March 2020 exposed the true risk of their products," said Gurbir S. Grewal, Director of the SECs Division of Enforcement. The funds also attracted pension funds that served laborers in Alaska and subway workers in New York. Postal Inspectors will never let these schemes go unchecked and will vigorously investigate and pursue those who choose criminal behavior over honest business practices.. Arkansas decides to build up its investment in the Allianz funds. "Unfortunately, we've seen a recent string of cases in which derivatives and complex products have harmed investors across market sectors," SEC Chair Gary Gensler said in a statement. Two years after the spectacular collapse of the insurance giants Structured Alpha hedge funds, a low-profile business registered in Florida, 5,000 miles from the Munich headquarters, the shock waves continue to reverberate. 371 (Count Five), United States v. Trevor Taylor, 22 Cr. The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty. "We have faith that the justice system will reject this meritless and ill-considered attemptby the governmentto criminalize the impact of theunprecedented,COVID-induced market dislocation of March 2020," Tournant's counsel, Seth Levine and Daniel Alonso, said in a joint statement on behalf of their client, who they say also had investment in the fund. "Greg Tournant has been unfairly targeted [in a] meritless and ill-considered attempt by the government to criminalize the impact of the unprecedented, COVID-induced market dislocation," the lawyers said in a joint statement. 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. Every single time we greatly benefited from the higher levels of volatility and were able to generate much higher returns in the following two or three months after the draw-down, Tournant said in a 2016 marketing video. Allianz subsequently moved about $120 billion of investor assets to Voya Financial Inc (VOYA.N) in exchange for a 24% stake in Voya's asset management business. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Except, according to the allegations, Tournant and his portfolio co-managers (Taylor and Bond-Nelson entered guilty pleas in early March and are cooperating with the federal government) smoothed over numbers when they werent outright lying about them, often buying the index but compromising on the put options promised. 1 auto market, Exclusive: Airbus advises airlines of 2024 delays, keeps output goals, Polestar to start production in South Carolina from 2024, says CEO, C.Suisse to move forward Q1 earnings, report before UBS, Norway wealth fund welcomes government request on unlisted equities. Thats the allegation both the U.S. Justice Department and the U.S. Security and Exchange Commission make in an indictment released Tuesday. Two other Allianz execs pleaded guilty to playing a part in the scheme and are now cooperating with the governments investigation. As part of the parallel criminal proceeding, AGI US, Taylor and Bond-Nelson have agreed to guilty pleas. 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. Editor's note: This article has been updated to include the statement from Gregoire Tournant's legal team. Todays actions are further evidence that this office is not asleep on the beat and that with our law enforcement partners we will act swiftly to protect investors and bring white-collar criminals to justice.. Greg looks forward to vigorouslydefending himself in Court against these charges., Allianz told to pay $6bn after SEC charges three execs with fraud over Structured Alpha funds scandal. By the end of March, Allianz announced it was liquidating two Structured Alpha funds. Mr Tournant and Mr Taylor worked together well over a decade ago when they were at Structured Alphas predecessor, Options Management, which had a similar strategy. June 30 The Arkansas funds board votes to sue Allianz. Allianz's guilty plea carries a 10-year ban on Allianz Global Investors' providing advisory services to U.S.-registered investment funds. He earned a grade of A+, which is not easy in my class. 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. 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. 371 (Count Four), United States v. Allianz Global Investors U.S. LLC, Securities Fraud, 15 U.S.C. The department stands ready to keep bringing these kinds of charges to assure the public that no one is above the law.. Byrd & quot ; Linas was in my C programming class ( ECE ). Is above the law v. Allianz Global investors U.S. LLC, Securities Fraud, 15 U.S.C U.S.-registered. 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