MUNICH/NEW YORK Allianz SE of Germany agreed to pay more than $6 billion, and its asset management subsidiary in the United States pled guilty to criminal securities fraud in connection with the collapse of a group of investment funds early in the COVID-19 epidemic.

Allianz’s settlements with the United States Department of Justice and the United States Securities and Exchange Commission are among the largest in corporate history, dwarfing previous settlements secured under President Joe Biden’s administration.

Gregoire Tournant, the former chief investment officer who founded and ran the now-defunct Structured Alpha funds, was also charged with fraud, conspiracy, and obstruction, while two other former portfolio managers pleaded guilty to similar charges.

The Structured Alpha funds, which formerly had more than $11 billion in assets under management, lost more than $7 billion as COVID-19 roiled markets in February and March 2020.

Prosecutors claimed that Allianz Global Investors US LLC misled pension funds for teachers, bus drivers, engineers, religious organisations, and others by understating the funds’ risks, and that its management had “significant gaps.”

Investors were informed the funds used options such as hedges to safeguard against market crashes, but prosecutors said the fund managers failed to buy the hedges on many occasions.

Prosecutors allege that the managers faked fund outcomes in order to increase their compensation through performance fees, with Tournant, 55, earning $13 million in 2019 and becoming his unit’s highest or second-highest-paid employee from 2015 to 2019.

According to investigators, the misrepresentations began as early as 2014 and contributed to Allianz earning more than $400 million in net profit.

At a news conference in Manhattan, U.S. Attorney Damian Williams stated that more than 100,000 investors were injured, and that while American prosecutors rarely prosecute corporations with crimes, it was “the right thing to do” in this case.

Investors “were promised a relatively safe investment with strict risk controls designed to weather a sudden storm, like a massive collapse in the stock market,” he said. “Those promises were lies…. Today is the day for accountability.”

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