Allianz Global Investors, the Investment Advisory Firm Gets $5 Billion Sentence from US Judge in Securities Fraud Case (Photo: Law.com)
ALLIANZ GLOBAL INVESTORS RECEIVED ITS SENTENCE FROM A JUDGE IN MANHATTAN
The 2020 collapse of a group of investment funds was resolved by Allianz’s $6 billion deal with a U.S. judge on Wednesday, putting an end to the controversy that brought down one of the German company’s U.S. subsidiaries.
In May 2022, Allianz Global Investors reached a settlement with American authorities regarding claims that its U.S. unit had deceived investors in the now-defunct Structured Alpha Funds.
The US subsidiary, Allianz Global Investors (AGI) admitted to committing criminal securities fraud and consented to compensate investors with fines and restitution.
On Wednesday, District Court Judge Colleen McMahon in Manhattan handed down what she described as an “astronomical” financial penalty.
Regarding the accusations, she remarked, “This is a sad and sorry state of affairs.”
In order to resolve the claims, Allianz Global Investors reportedly paid $5 billion to investors and more than $840 million to U.S. federal officials.
U.S. prosecutors said in court papers that they had agreed to accept only a portion of a forfeiture judgment that was previously released as part of the case’s $6 billion in penalties.
The Structured Alpha funds, which formerly had more than $11 billion in assets under management, lost more than $7 billion as COVID-19 shook the markets in February and March 2020.
Allianz Global Investors in Frankfurt (Photo: Dreamstime.com)
By downplaying the risks associated with the Structured Alpha funds and having “significant gaps” in its oversight, according to the prosecution, Allianz Global Investors deceived pension funds.
Since last year, the sentencing has been delayed to give Pacific Investment Management Co. (PIMCO), a subsidiary of Allianz, time to discuss how to continue managing $170 billion in American retirement funds in spite of the conviction of Allianz Global Investors .
Under U.S. law, businesses that violate the law or engage in fraud are typically prohibited from undertaking certain tasks, such as managing pension plans or conducting private offers. The company’s affiliates are also subject to the rule.
On July 5, the Employee Benefits Security Administration of the U.S. Department of Labor granted PIMCO a five-year reprieve from a 10-year prohibition. The asset manager may attempt to have the exemption prolonged.
Allianz Global Investors (AGI), which was given a 10-year ban, is anticipated to wind down its operations, according to its attorney’s testimony in court.
In response to the criminal investigation, Allianz Global Investors transferred around $120 billion in investor assets to Voya Financial (VOYA.N) in exchange for a 24% share in Voya’s asset management division.
