Tournant Faces Prison Time and Fines for Investment Fraud
Gregoire Tournant, a former Allianz fund manager, pleaded guilty on Friday to charges related to the massive collapse of the company’s Structured Alpha funds. The collapse, triggered by the pandemic, resulted in an estimated $7 billion in investor losses.
Guilty Plea and Potential Sentence
Tournant, 57, appeared before Chief Judge Laura Taylor Swain of the Manhattan federal court and admitted to two counts of investment adviser fraud. He now faces a potential prison sentence of up to 10 years at his sentencing hearing scheduled for October 16th. Additionally, Tournant has agreed to relinquish $17.5 million in ill-gotten gains, including bonuses inflated due to his fraudulent activities.
Allianz’s Previous Settlement
This case stems from the March 2020 meltdown of the Structured Alpha funds, which Tournant created and managed as chief investment officer. In May 2022, to resolve government investigations into the collapse, Allianz, the German insurance giant, agreed to pay over $6 billion with its U.S. asset management unit pleading guilty to securities fraud. Two other former Allianz fund managers also admitted guilt at that time.
Misleading Investors and Risky Investment Strategies
The Structured Alpha funds relied heavily on stock options, a strategy marketed as a form of “insurance” to minimize losses during a market downturn. However, prosecutors allege Tournant misled investors by manipulating performance data and abandoning the promised hedging strategy. They further accuse him of obstructing a US Securities and Exchange Commission investigation by directing a colleague to lie.
Fund Collapse and Tournant’s Remorse
Prior to the pandemic, the Structured Alpha funds boasted over $11 billion in assets under management. However, during the initial market panic triggered by the COVID-19 pandemic in February and March of 2020, the funds hemorrhaged roughly $7 billion. During Friday’s hearing, Tournant acknowledged providing investors with deceptive information, stating, “I knew this conduct was wrongful.”
Prosecutors’ Case and Tournant’s Defense
Prosecutors allege the fraudulent activity spanned from 2014 to March 2020, with Tournant earning more than $60 million during that period. Tournant previously pleaded not guilty to a broader set of charges, including securities fraud, conspiracy, and obstruction. He also accused the law firm Sullivan & Cromwell, which initially represented both him and Allianz, of scapegoating him after Allianz decided to cooperate with federal authorities. Judge Swain ultimately rejected his attempt to have the case dismissed in August of 2023.
