SGT represented several institutional and individual investors in a series of mutual funds managed by Allianz Global Investors U.S. LLC, a US-based asset management company owned by the German insurance giant Allianz SE.
The AllianzGI “Structured Alpha” mutual funds were an off-shoot of a suite of hedge funds advertised as capable of returning several percentage points of “alpha”—or returns uncorrelated to broader market movements—via a “market neutral” complex options trading strategy. A key feature of the advertised strategy was a hedging strategy which AllianzGI represented would result in the funds maintaining hedges 10-15% out of the money so that the funds would remain protected against rapid market downturns. Additional advertised features were robust risk management and compliance procedures.
However, the market turmoil of February and March 2020 exposed that AllianzGI did not maintain any hedges which would effectively protect the funds against the 10-15% market downturn as advertised, nor did AllianzGI conduct adequate risk management or compliance procedures in overseeing the Structured Alpha mutual funds. Instead, AllianzGI allowed a group of employees to operate without any oversight, resulting in an unchecked fraud that when undiscovered for decades.
In May 2022, the DOJ and SEC announced criminal and civil charges against AllianzGI US and three AllianzGI US employees: Gregoire Tournant, Trevor Taylor, and Stephen Bond-Nelson. Taylor and Bond-Nelson are cooperating and pleaded guilty earlier in 2022 and Tournant has pleaded not guilty. Although the charges and restitution orders did not address mutual fund investors, SGT’s investigation and analysis of the funds revealed that mutual fund shareholders were victimized by the same activity which led to the criminal charges.
On September 9, 2022, SGT (along with co-counsel) filed an Amended Class Action Complaint on behalf of SGT clients Knox County Pension & Retirement Board, Knox Chapman Utility District and individual investor Emily E. Cole and others alleging, inter alia, violations of Section 11 of the of the Securities Act, 15 U.S.C. § 77k, Section 12(a)(2) of the Securities Act, 15 U.S.C. § 77l(a)(2), and Section 15 of the Securities Act, 15 U.S.C. § 77o.
On November 1, 2022, SGT and co-counsel announced they had agreed to a $145 million settlement with AllianzGI. The settlement was given final approval by Justice Andrew Borrok on March 9, 2023.
The case was Jackson v. Allianz Global Investors U.S. LLC, Index No. 651233/2021 (N.Y.S.).