Ex-Allianz Fund Manager Pleads Guilty in $7 Billion Meltdown

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Former Allianz fund manager Gregoire Tournant pleaded guilty to his involvement in a significant collapse of private investment funds during the early stages of the COVID-19 pandemic, which resulted in approximately $7 billion in investor losses. Tournant, 57, from Basalt, Colorado, admitted to two counts of investment adviser fraud during a hearing presided over by Chief Judge Laura Taylor Swain at the federal court in Manhattan. He faces a potential prison sentence of up to 10 years, with sentencing scheduled for October 16. Additionally, Tournant has agreed to forfeit $17.5 million in ill-gotten gains, which includes bonuses that were fraudulently inflated.

The charges against Tournant are related to the March 2020 collapse of Allianz’s now-defunct Structured Alpha funds. Tournant had created and managed these funds as the chief investment officer. In May 2022, Allianz settled by agreeing to pay more than $6 billion, and its U.S. asset management unit pleaded guilty to securities fraud to resolve various government investigations into the collapse. At that time, two other former Allianz fund managers also pleaded guilty.

The Structured Alpha funds were heavily invested in stock options, designed to minimize losses during market downturns, which Tournant compared to a form of insurance. However, prosecutors revealed that Tournant misled investors regarding the risks associated with the funds by falsifying performance data and deviating from the promised hedging strategy. He also obstructed an investigation by the U.S. Securities and Exchange Commission by instructing a colleague to lie.

At their peak, the Structured Alpha funds managed over $11 billion in assets but suffered a catastrophic loss of about $7 billion in February and March 2020 as the pandemic triggered a global market panic. During his guilty plea, Tournant admitted to providing misleading information to investors, acknowledging the wrongful nature of his actions by stating, “I knew this conduct was wrongful.”

Prosecutors indicated that the fraudulent activities spanned from 2014 to March 2020, during which Tournant received over $60 million in compensation. Initially, Tournant had pleaded not guilty to five criminal counts, including investment adviser fraud, securities fraud, conspiracy, and obstruction. He also accused the law firm Sullivan & Cromwell, which had represented both him and Allianz, of using him as a scapegoat after Allianz decided to cooperate with federal prosecutors. However, Judge Swain dismissed Tournant’s request to drop the criminal case last August.

The case is formally titled U.S. v. Tournant, and it is being heard in the U.S. District Court for the Southern District of New York, under case number 22-cr-00276.