Allianz Global Investors U.S. LLC (AGI) is an investment management firm that is part of the Allianz Group. AGI US was founded in 2010 and is headquartered in New York City. The company provides portfolio management and advisory services to individuals, corporations, public pension and profit-sharing plans, charitable institutions, foundations, and trusts in the United States. AGI Us is also an investment adviser registered with the Securities and Exchange Commission (“SEC”).

Allianz Group is a German multinational financial services company headquartered in Munich, Germany. It is one of the largest insurers and financial services groups in the world, with over 150 million customers in more than 70 countries. Allianz’s core businesses are insurance and asset management. The company offers a wide range of insurance products, including life insurance, property and casualty insurance, and health insurance. Allianz also manages over $2.4 trillion in assets, making it one of the largest asset managers in the world.

The United States Attorney for the Southern District of New York, announced that Allianz Global Investors U.S. LLC was sentenced by U.S. District Judge Colleen McMahon for a multi-year securities fraud involving a series of private investment funds managed by AGI. Those funds ultimately collapsed, leading to billions of dollars of investor losses.

AGI previously pled guilty to one count of securities fraud. The sentencing had been postponed since last year to give Allianz’s Pacific Investment Management Co (PIMCO) time to negotiate its ability to keep handling $170 billion in U.S. retirement funds despite AGI’s conviction.

AGI was sentenced to financial penalties comprised of over $463 million in forfeiture, over $3.23 billion in restitution, and over $2.33 billion in fines. These amounts include restitution to the victims, the forfeiture of proceeds traceable to the fraud, and the forfeiture by AGI’s corporate parent of the dividends that were paid from AGI to its corporate parent that are traceable to the fraud. AGI has paid these financial penalties in full and has compensated victims of the conduct through settlements in civil litigation filed against AGI in an aggregate amount of over $5 billion.

Prosecutors say AGI engaged in a scheme to defraud investors in multiple private funds within AGI’s “Structured Alpha Funds.” The Structured Alpha Funds were among the most profitable groups of funds AGI managed and, at their height, held over $11 billion in assets under management. The Funds employed a complex options trading strategy that sought to provide investors with guaranteed returns, while managing risk. AGI deceived the Funds and their investors by understating the risk to which investors’ assets were exposed, and therefore how the returns they touted were actually generated.

In particular, in order to generate the Funds’ positive returns and attract and retain capital, prosecutors say AGI fraudulently misled investors regarding the risk taken on by the funds. Among other things, 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. Instead of managing the Funds as promised to investors, AGI deployed an investment strategy that prioritized returns over risk management in ways that were fundamentally inconsistent with representations made to investors. As a result of this scheme to defraud, investors’ funds were exposed to higher risk than promised, and investors were deprived of information about the true risks to which their investments were exposed.

After the market dislocations following the onset of the COVID-19 pandemic in March 2020, the Funds lost in excess of $8 billion in market value and $3 billion in principal, faced margin calls and redemption requests, and ultimately were shut down. More than 100 investors were victims of this scheme, including, among others, pension funds for teachers, religious organizations, bus drivers, engineers, and other individuals, universities, and charitable organizations.

U.S. Attorney Damian Williams said: “Telling the truth to investors is the core duty of an investment adviser. AGI violated that central tenet and deceived investors by materially understating the risk to which their assets were exposed.”

In the wake of the criminal case, Allianz moved about $120 billion of investor assets to Voya Financial in exchange for a 24% stake in Voya’s asset management business.