Allianz Global Investors U.S. LLC (AGI) was sentenced by a federal judge recently in connection with a charge of securities fraud, according to Wealth Management.
The U.S. Attorney’s Office for the Southern District of New York alleged that AGI, a subsidiary of Allianz SE, engaged in a scheme from 2014 to at least March 2020 to defraud investors within the firm’s Structured Alpha Funds. AGI was accused of deceiving their investors by understating the risk to the investors’ assets and how the returns were generated.
According to prosecutors, “AGI misrepresented the hedging and other risk-mitigation strategies that were undertaken to protect investor funds. Investors also received documents altered to hide the riskiness of the Funds’ investments.”
AGI was accused of using an investment strategy that prioritized returns over risk management, which misrepresented what investors had been told and put their assets at higher risk than was promised.
When the stock market declined after the start of the COVID-19 pandemic, the Funds lost over $8 million in market value and $3 billion in principal, and were shut down. Prosecutors said over 100 investors sustained billions in losses, including pension funds for teachers, religious organizations, bus drivers, engineers, and other individuals, universities, and charitable organizations.
As part of a plea deal, AGI pleaded guilty to a criminal charge of securities fraud. U.S. District Judge Colleen McMahon sentenced AGI to over $463 million in forfeiture of proceeds from the fraud, over $3.23 billion in restitution to the victims, and over $2.33 billion in fines. AGI will receive credit for $1.9 billion already paid to victims of the fraud and a $675 million civil penalty paid to the SEC. The firm was also sentenced to five years probation.
“Telling the truth to investors is the core duty of an investment adviser,” said U.S. Attorney Damian Williams. “AGI violated that central tenet and deceived investors by materially understating the risk to which their assets were exposed.”
The attorneys at Lewitas Hyman have decades of experience dealing with securities fraud cases and have a deep understanding of how capital markets and financial service firms are intended to work to protect investors. We bring a unique level of knowledge and experience when representing the rights of investors, including resolving cases through arbitration and litigation when necessary. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Lewitas Hyman at (844) 651-2641 or through our online contact form for a no-cost evaluation of your matter.