Allianz Subsidiary Pleads Guilty in $6 Billion Settlement
A U.S. investing division of Allianz SE pleaded guilty to securities fraud, and as a result agreed to pay $6 Billion in restitution and penalties to investors who were unfortunate enough to get wrecked as a result of the March 2020 sell-off. In addition to a plea agreement with the Manhattan U.S. attorney’s office, the Allianz subsidiary also settled additional civil-fraud claims levied by the SEC.
According to the plea agreement, Allianz Global Investors U.S. admitted that they neglected to have proper internal protocol in place, and mislead investors.
This unfortunate series of events came as capital markets sold-off in historic fashion, credit markets literally froze up, and billions of dollars were evaporated within seconds during the onset of the COVID pandemic back in March 2020. This also ushered in the infamous Fed action where they literally backstopped the corporate bond market singlehandedly. Jerome Powell single handedly saved the U.S. economy, similar to Ben Bernanke’s stint as chairman of the Fed during the GFC.
This plea agreement by Allianz is one of the largest that the Justice Department has seen from a financial institution in recent years. Investors who fell victim to Allianz’s negligence include: Arkansas teachers’ pensions, Milwaukee City employee’s pensions, and New York City Subway workers’ pensions. Something along the magnitude of billions of dollars were lost as a result. You hate to see it.
The case brought forth by the Manhattan U.S. attorney’s office surrounded “Allianz Global Investors’ Structured Alpha Funds.” These funds comprised of insurance on stock options which safe-guarded insurers in the event of tumultuous market events. Well unfortunately, those options were exercised when the entire market quite literally cratered. Billions of dollars ($7 Billion in March 2020 to be exact) of Allianz funds was liquidated as a result. Bye bye pension funds.
According to the agreement, money managers running the Structured Alpha Funds scheme straight up lied about what estimated losses the fund could see, along with funds performance. Not your typical average little white lie, to say the least.
And Allianz used the age old scapegoat to try and weasel out of the claims, stating that the individuals associated with the losses are no longer with the company. Outstanding move. The story doesn’t stop there. According to Bloomberg, one of the cooperators who ended up pleading guilty “excused himself to use the bathroom [in the SEC office] and never returned.”
This is truly a veteran play that only very very few are truly capable of pulling off in their lifetime.