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. Get the insurance industry's trusted newsletter, Your email address will not be published. These funds were marketed largely to institutional investors, including pension funds for workers all across America. Prosecutors say that although Mr Tournant assured big investors safety was his top priority, he secretly took huge, undisclosed risks. Tournant and Taylor declined to comment. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. Rare Guilty Plea Allianz in February set aside $4.1 billion for the disaster, but the final reckoning is still due and could cost plenty more. The over-the-counter spreads were so great, they couldnt close positions, said Frenkel, who was chief compliance officer for Innovative Options. He was arrested in Colorado though not by local authorities, according to officials from the Pitkin County Sheriffs Office, Aspen Police Department and Basalt Police Department and subsequently released on $20 million bond, per reporting from Bloomberg. See here for a complete list of exchanges and delays. Because AGI, a registered investment adviser, failed to provide meaningful oversight, Tournant and his co-conspirators were able to deceive investors about the risks they were taking with their money. The Aspen Daily News has chronicled Tournants real estate dealings with Snowmass Club condominium properties in, Tournant faces charges of conspiracy, securities fraud and obstruction of justice charges. By the end of March, Allianz announced it was liquidating two Structured Alpha funds. 2723 0 obj Tournant, with Allianz Global Investors since 2002, founded the so-called Structured Alpha funds in 2005. Structured Alphas performance was solid. Seth Levine, a lawyer for Tournant, said he will seek to dismiss the case because prosecutors obtained information from Tournant's former lawyer, who also represented Allianz, that should have been withheld based on attorney-client privilege. 149 (DLC), Conspiracy to commit securities fraud, investment adviser fraud, and wire fraud, 18 U.S.C. While Allianz made no secret of this arrangement, angry clients would later claim it was a recipe for bigger risks. 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. The U.S. Justice Department and Securities and Exchange Commission have opened investigations. United States v. Gregoire Tournant, 22 Cr. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. Its every investors dream: Make money when markets go up, and when markets go down, and even when markets go practically nowhere. n=t gM 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. In a 2016 video reviewed by Reuters, Tournant likened Structured Alpha's strategy to insurance. Careers have been upended. Instead, U.S. authorities say, 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. Required fields are marked *. Regulators said the misconduct included when Tournant and Bond-Nelson altered more than 75 risk reports before sending them to investors. When a story breaks, your email dings. 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? But prosecutors said it was barely functional. Neil Weinberg, Alex Wittenberg and Will Louch, Analysis Allianz on Tuesday announced plans to sell the bulk of the US piece of its Allianz Global Investors business to Voya Financial. Prosecutors said the managers also inflated fund results to boost their pay through performance fees, with Tournant, 55, collecting $13 million in 2019 and becoming his unit's highest or second-highest-paid employee from 2015 to 2019. March 11, 2022 at 01:54 PM document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Grocery Chain Accuses Chubb of Lowballing, Fla. 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Tournant faces charges of conspiracy, securities fraud and obstruction of justice charges. March 25 Allianz announces the liquidation of two hard-hit funds. By the end of March, Allianz announced it was liquidating two Structured Alpha funds. Why AI tools, like GPT, are now at the frontline of the Citys talent war? xXnF}Gn@@&Z+'>ihS R/.JWC]/6z%8_~qv)2/E~8ye&_?A_M$,'ic-M,a%RZ*xRlK7SDK?)]G9G v-A[;DnEjl9X"+u,a(\wDxZ*(#X=iU The funds also attracted pension funds that served laborers in Alaska and subway workers in New York. Investigators said the misrepresentations began in 2014, and helped Allianz generate more than $400 million of net profit. While the losses are regrettable, they are not the result of any crime., The Governments attempt to characterize them as such is not only unfairly damaging to Gregs reputation and livelihood, but extremely dangerous to the market as a whole. The German company earlier . 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. Notably, as markets got more volatile, the funds could get more profitable, Allianz told clients, while warning that all investments entail risks. Allianz Fires 2 Asset Managers Who Ran Group of Collapsed Investment Funds 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. By December 2019, Structured Alpha had grown to more than $10 billion, according to a person familiar with the matter. 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. As a consequence of the guilty plea, AGI US is automatically and immediately disqualified from providing advisory services to US registered investment funds for the next ten years, and will exit the business of conducting these fund services. Unfortunately, weve seen a recent string of cases in which derivatives and complex products have harmed investors across market sectors. Thank you! He was arrested in Colorado though not by local authorities, according to officials from the Pitkin County Sheriffs Office, Aspen Police Department and Basalt Police Department and subsequently released on $20 million bond, per reporting from, We have faith that the justice system will reject this meritless and ill-considered attemptby the governmentto criminalize the impact of theunprecedented,COVID-. 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. Mr Tournant, the chief investment officer at Miami-based Structured Alpha, spent years "smoothing" performance data, lying about hedges against market downturns, and pretending risk managers. Those products would even turn a profit when markets went nowhere, according to product marketing materials. The department stands ready to keep bringing these kinds of charges to assure the public that no one is above the law.. But when the pandemic hit, everything went haywire. See here for a complete list of exchanges and delays. An arraignment was set for June 2 in New York. 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. Its Alpha U.S. Equity 250 fund posted average annual returns of 10.9% between early 2005 and June 2018, compared with the S&P 500s 8.7% average annualized return over the same period, according to a 2018 marketing document. We are shocked by the actions of Greg Tournant and his former colleagues.. 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. 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. Be the first to know what's happening as it's happening. "No compliance system is perfect, but the controls at AGI didn't even stand a chance," Williams said. The scheme alleged was an egregious, long-running and extensive fraud that went undetected for years. 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. The board alleged that when the pandemic started fueling wild volatility in February, Structured Alpha made a fateful bet against further market declines. Japan's Nissan Motor on Tuesday unveiled a new electric sport-utility vehicle (SUV) at the Shanghai auto show as it pledged its commitment to the Chinese auto market, which it said was likely to continue to pioneer the rise of electric cars. Greg Tournant, Stephen Bond-Nelson and Trevor Taylor no longer work for AllianzGI, a spokesperson has confirmed to Citywire Selector. Allianz agreed to pay more than $6 billion in a settlement with U.S. authorities in May, and the German company's U.S. asset management unit pleaded guilty to securities fraud. L@IW$',Bt^[J[>}+$"j|\,/cmhyqyRdY'yD,1. R&qr`$."Eb+[#iw}|`9 pT(G!t'm Disaster struck in 2008 when the collapse of Lehman Brothers rocked global finance, freezing up markets and with them, Innovative Options trades. Investors lost billions of dollars, the SEC complaint details. The Securities and Exchange Commission (SEC) today charged Allianz Global Investors U.S. LLC (AGI US) and three former senior portfolio managers with a massive fraudulent scheme that concealed the immense downside risks of a complex options trading strategy they called Structured Alpha. AGI US marketed and sold the strategy to approximately 114 institutional investors, including pension funds for teachers, clergy, bus drivers, engineers, and other individuals. Assistant U.S. 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. But when the pandemic hit, everything went haywire. Tournant, with Allianz Global Investors since 2002, founded the so-called Structured Alpha funds in 2005. At Allianz Global Investors U.S., Tournant and his Structured Alpha team were incentivized to pursue outsized returns. A .gov website belongs to an official government organization in the United States. Investors allege Allianz and Structured Alpha abandoned risk controls and turned a challenging situation into a disaster by doubling down on a bad strategy. 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. 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. Long before the pandemic, their small investment firm on Miamis Brickell Avenue, aka, Wall Street South, collapsed when its trades went bad, according to two former employees there foreshadowing what was to come. Tournant, the former chief investment officer who created and oversaw Allianz's now-defunct Structured Alpha funds, was indicted in May on fraud, conspiracy and obstruction charges and pleaded not guilty. Its Alpha U.S. Equity 250 fund posted average annual returns of 10.9% between early 2005 and June 2018, compared with the S&P 500s 8.7% average annualized return over the same period, according to a 2018 marketing document. It expects a final agreement in the coming weeks. 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. You have permission to edit this article. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. NEW YORK, Sept 15 (Reuters) - A U.S. judge on Thursday set a 2024 trial date for former Allianz SE (ALVG.DE) executive Gregoire Tournant, citing the complexity of allegations he defrauded investors out of billions of dollars by understating the risks of what they bought. a massive fraudulent scheme, as described in an SEC press release. 1 Twitter 2 Facebook 3RSS 4YouTube Allianz is one of the worlds largest financial services companies and one of the worlds largest insurance companies. That change was not disclosed to investors, prosecutors allege. At Allianz Global Investors U.S., Tournant and his Structured Alpha team were . The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty. Attorneys Margaret Graham, Gina Castellano, Nicholas Folly and Richard Cooper are in charge of the prosecution. 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