By Luc Cohen and Jonathan Stempel
NEW YORK (Reuters) – A former Allianz (ETR:) fund manager pleaded guilty on Friday for his role in a collapse of private investment funds fueled by the pandemic that caused an estimated $7 billion in investor losses.
Gregoire Tournant, 57, of Basalt, Colorado, admitted to two counts of investment adviser fraud during a hearing before Chief Judge Laura Taylor Swain of Manhattan federal court.
He faces up to 10 years in prison at his sentencing on October 16. Tournant also agreed to forfeit $17.5 million in ill-gotten gains, including bonuses inflated by his fraud.
The case stemmed from the March 2020 collapse of the German insurer’s now-defunct Structured Alpha funds, which Tournant founded and oversaw as chief investment officer.
In May 2022, Allianz agreed to pay more than $6 billion and its U.S. asset management unit pleaded guilty to securities fraud to resolve government investigations into the collapse. Two other former Allianz fund managers pleaded guilty at the time.
The Structured Alpha funds had bet heavily on stock options in a way designed to limit losses in a market sell-off, which Tournant likened to a form of insurance.
Prosecutors said Tournant misled investors about the funds’ risks by changing performance data and deviating from his promised hedging strategy, and obstructed a U.S. Securities and Exchange Commission investigation by directing a colleague to lie.
The funds once had more than $11 billion in assets under management, but lost about $7 billion in February and March 2020 as the onset of the pandemic caused a global market panic.
Before pleading guilty, Tournant admitted to providing misleading information to investors.
“I knew this behavior was unlawful,” Tournant told the judge.
Prosecutors said the fraud ran from 2014 through March 2020, with Tournant receiving more than $60 million during that time.
Tournant previously pleaded not guilty to five criminal counts, including investment advisor fraud, securities fraud, conspiracy and obstruction.
He had also accused the law firm Sullivan & Cromwell, which had represented him and Allianz, of scapegoating him after Allianz decided to cooperate with federal prosecutors.
Swain denied Tournant’s request to dismiss the criminal case last August.
The case is US v. Tournant, US District Court, Southern District of New York, No. 22-cr-00276.
