“Structured Alpha” and Securities Fraud Costs Allianz Global Investors more than $1 Billion

Chicago-based Stoltmann Law Offices is representing clients who’ve suffered losses in money-losing complex options trading strategies pitched to them by their financial or investment advisors. The U.S. Securities and Exchange Commission (SEC) has 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.”

After the COVID-19 market crash of March 2020 exposed the fraudulent scheme, the SEC stated, “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.”

The SEC stated AGI US marketed and sold the strategy to approximately 114 institutional investors, including pension funds for teachers, clergy, bus drivers, engineers, and other individuals. “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.”
“From at least January 2016 through March 2020, the defendants lied about nearly every aspect of a highly complex investment strategy they marketed to institutional investors, including pension funds managing the retirement savings of everyday Americans. While they were able to solicit over $11 billion in investments by the end of 2019 and earn over $550 million in fees as a result of their lies, they lost over $5 billion in investor funds when the market volatility of March 2020 exposed the true risk of their products,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.

AGI US admitted that its conduct “violated the federal securities laws and agreed to a cease-and-desist order, a censure and payment of $315.2 million in disgorgement, $34 million in prejudgment interest, and a $675 million civil penalty, a portion of which will be distributed to certain investors.”

If your financial advisor solicited you to invest in complicated options strategies and you lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!

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