Commodity Futures Trading Commission (CFTC) Alert! CFTC finally revokes registrations of Allianz Global Investors US LLC.
who 10 months ago was charged by the SEC for a fraudulent scheme that led pension funds for teachers, clergy, engineers, and other Americans to lose billions of dollars.
Source: https://www.cftc.gov/PressRoom/PressReleases/8678-23
The Commodity Futures Trading Commission today announced it has filed a Notice of Intent to Revoke the Registrations of Allianz Global Investors US LLC (AGI US), a Delaware limited liability company. The CFTC simultaneously issued an Opinion and Order accepting the settlement offer from AGI US and settling the action. The order revokes AGI US’s registrations with the CFTC as a commodity trading advisor and commodity pool operator.
Pursuant to the Commodity Exchange Act (CEA), the notice alleged AGI US was subject to statutory disqualification of its registrations based on a Securities and Exchange Commission (SEC) order that found AGI US violated multiple anti-fraud provisions of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. In re Allianz Global Invs. U.S. LLC, SEC No. 3-20855, 2022 WL 1644317 (May 17, 2022) (SEC order).
The SEC order found that AGI US, through three portfolio managers, engaged in a massive fraudulent scheme in which it made numerous misrepresentations and omissions to the institutional investors of funds that employed a complex securities options trading strategy called Structured Alpha. Specifically, the SEC order found that AGI US misrepresented to investors the significant downside risks and actual performance of the Structured Alpha funds. According to the SEC order, the 2020 COVID-related market volatility exposed AGI US’s scheme and revealed that the Structured Alpha funds and their investors suffered billions of dollars in losses as a result of AGI US’s misconduct.
The CFTC’s order finds that AGI US is subject to statutory disqualification from registration with the CFTC pursuant to CEA Section 8a(2)(E)(i) and revokes AGI US’s registrations under the terms in the order.
The CFTC thanks the National Futures Association for its assistance in this matter.
The Division of Enforcement staff responsible for this matter are Stephen Turley, Paul M. Flucke, Rachel Hayes, Jeff Le Riche, Christopher Reed, Charles D. Marvine, and former staff member Daniel Contrastano.
More from CTFC:
- Opinion and Order: Allianz Global Investors US, LLC (takes you to download pdf from CTFC)
- Notice of Intent: Allianz Global Investors US, LLC (takes you to download pdf from CTFC)
What we knew 10 months ago:
(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. After the COVID-19 market crash of March 2020 exposed the fraudulent scheme, the strategy lost billions of dollars as a result of AGI US and the portfolio managers’ misconduct. AGI US has agreed to pay billions of dollars as part of an integrated, global resolution, including more than $1 billion to settle SEC charges and together with its parent, Allianz SE, over $5 billion in restitution to victims.
"Allianz Global Investors admitted to defrauding investors over multiple years, concealing losses and downside risks of a complex strategy, and failing to implement key risk controls," said SEC Chair Gary Gensler. "The victims of this misconduct include teachers, clergy, bus drivers, and engineers, whose pensions are invested in institutional funds to support their retirement. This case once again demonstrates that even the most sophisticated institutional investors, like pension funds, can become victims of wrongdoing. Unfortunately, we’ve seen a recent string of cases in which derivatives and complex products have harmed investors across market sectors. The Commission stands ready to use all appropriate tools to protect investors, including upholding prohibitions against certain activities by the guilty parties. I’d like to thank and commend our staff for their excellent forensic work that uncovered this fraud and held the wrongdoers accountable."
The SEC’s complaint, filed in the federal district court in Manhattan, alleges that Structured Alpha’s Lead Portfolio Manager, Gregoire P. Tournant, orchestrated the multi-year scheme to mislead investors who invested approximately $11 billion in Structured Alpha, and paid the defendants over $550 million in fees. It further alleges that, with assistance from Co-Lead Portfolio Manager, Trevor L. Taylor, and Portfolio Manager, Stephen G. Bond-Nelson, Tournant manipulated numerous financial reports and other information provided to investors to conceal the magnitude of Structured Alpha’s true risk and the funds’ actual performance.
Defendants reduced losses under a market crash scenario in one risk report sent to investors from negative 42.1505489755747% to negative 4.1505489755747% -- by simply dropping the single digit 2. 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.
Previous Superstonk coverage:
Allianz lost 7 billion from Arkansas Teachers pension, etc , not retail investors
TLDRS:
CFTC finally revokes registrations of Allianz Global Investors US LLC who 10 months ago was charged by the SEC for a fraudulent scheme that led pension funds for teachers, clergy, engineers, and other Americans to lose billions of dollars.
