Prosecutors: NYC investment adviser blamed in $5B fraud

NEW YORK (AP) — Bus drivers, subway conductors and religious and charitable organizations nationwide were among victims when fraud and the COVID-induced market collapse speeded the downfall of private investment funds once worth $11 billion, causing a loss of $5 billion for investors in an investment company giant, authorities said Tuesday.

Additional details were expected to be released at a news conference to announce conspiracy, securities fraud and obstruction of justice charges against Gregoire Tournant, the former chief investment officer for a series of funds at Allianz Global Investors, one of the world’s largest financial services and insurance companies.

Allianz Global Investors US LLC, a New York City-based investment adviser, has agreed to plead guilty to its role in the fraud and pay $3.2 billion in restitution, a $2.3 billion fine and to forfeit $463 million, prosecutors said in a release.

The office of U.S. Attorney Damian Williams called it “one of the most significant corporate resolutions in history.

An indictment charged Tournant with defrauding investors in a series of investment funds managed by Allianz from 2014 through March 2020.

Tournant turned himself in Tuesday morning in Denver. A message for comment was sent to Tournant’s attorney.

In a release, the Securities and Exchange Commission announced parallel civil charges against Allianz Global Investors U.S. LLC and three former senior portfolio managers.

It said they carried out a “massive fraudulent scheme that concealed the immense downside risks of a complex options trading strategy they called ‘Structured Alpha.'"

The SEC said AGI US marketed and sold the strategy to about 114 institutional investors, including pension funds for teachers, clergy, bus drivers, engineers and others.

The SEC...