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The former chief investment officer of Allianz Global Investors U.S. LLC (AGI) has pleaded guilty to fraud charges in connection with his role in misleading institutional investors about the riskiness of certain funds, which was exposed when financial markets crashed in early 2020.

The former CIO and co-lead portfolio manager on certain private investment funds offered by AGI, Gregoire Tournant, pleaded guilty to two counts of investment adviser fraud in U.S. district court, the court said on Friday.

As part of the plea, Tournant agreed to forfeit approximately US$17 million in paid and deferred compensation. He will be sentenced in the case on Oct. 16.

The charges stem from AGI’s private funds, known as the Structured Alpha funds, which lost over US$7 billion in market value and were ultimately shuttered amid a flurry of margin calls and redemption requests when markets crashed alongside the onset of the Covid-19 pandemic in March 2020.

According to court filings, Tournant and others at AGI provided investors with misleading documents that hid the funds’ true riskiness, including that they were not adequately hedged against the risk of a market crash. When markets crashed, the deception was exposed.

In May 2022, AGI pleaded guilty to securities fraud in connection with the funds. It was fined US$2.3 billion, ordered to forfeit approximately US$463 million, and pay more than US$3 billion in restitution to the investors.

Previously, two other AGI portfolio managers, Trevor Taylor and Stephen Bond-Nelson, pleaded guilty in the case.

“Gregoire Tournant and his co-conspirators lied to investors, secretly exposed them to risk, and as Tournant has now admitted, sent victims altered risk reports,” said Damian Williams, U.S. attorney for the Southern District of New York, in a release.

“Today’s guilty plea is the culmination of a multi-year investigation and prosecution that has held wrongdoers responsible, made victims whole, and demonstrated this office’s resolve to pursue even the most sophisticated of financial crimes,” he said.

The firm and the two other managers settled charges with the U.S. Securities and Exchange Commission in the case in 2022.