Allianz settles charges with SEC for $1 billion

Allianz Global Investors will pay $1 billion to settle what regulators charged was a "massive fraudulent scheme" that involved over 100 institutional investors, including public pension funds.

• In a statement on Tuesday, the Securities and Exchange Commission said the complex investment strategy, which began as early as January 2016, came undone after the brutal COVID-19 bear market of March 2020 resulted in billions in losses.
• Three portfolio managers were named in the complaint, with two pleading guilty to criminal charges.
• Allianz's parent company will also cough up over $5 billion in restitution to the victims.

Why it matters: Germany-based Allianz is one of the biggest names in the financial world, with well over $2 trillion in assets under management. The scheme ultimately manipulating investors to sink $11 billion into a strategy called "Structured Alpha" that netted the firm around $550 million in fees. And a billion-dollar SEC settlement is a lot of money.

What they're saying: In recent days, the SEC has moved to reassert itself as the sheriff of Wall Street, and the downturn in markets is providing them with lots of fresh opportunities.

• "Allianz Global Investors admitted to defrauding investors over multiple years, concealing losses and downside risks of a complex strategy, and failing to implement key risk controls," said SEC Chair Gary Gensler.

• "The victims of this misconduct include teachers, clergy, bus drivers, and engineers, whose pensions are invested in institutional funds to support their retirement.

Thought bubble: A bull market can cover a multitude of sins — but when things get turbulent, malfeasance and criminality get exposed. That's when the "bezzle" comes to a screeching halt, and the crackdowns begin as Axios' Felix Salmon noted last week.