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A New York federal judge has sentenced Gregoire Tournant, a former portfolio manager for Allianz SE's U.S. unit, to probation instead of prison, despite allegations he lied to investors about the risk management of funds that lost over $7 billion during the early days of the COVID-19 pandemic.

Chief U.S. District Judge Laura Taylor Swain in Manhattan imposed a three-year probation sentence, with 18 months of home confinement, citing Tournant’s severe neurological illness and her conclusion that his misconduct was not the direct cause of the massive investor losses. Prosecutors had sought a minimum prison term of seven years.

Tournant, 57, pleaded guilty to investment adviser fraud in June and agreed to forfeit $17.5 million and pay a $250,000 fine. The funds at the center of the case, known as Structured Alpha, suffered catastrophic losses in March 2020 as global markets reeled from the pandemic.

Fraud Allegations

Prosecutors accused Tournant and others at Allianz Global Investors (AGI) of misleading institutional investors about the funds’ protections against market crashes and falsifying documents. After the funds collapsed, Tournant allegedly tried to obstruct the U.S. Securities and Exchange Commission's investigation.

Assistant U.S. Attorney Nicolas Roos argued that Tournant’s deception lured investors into the Structured Alpha funds and caused them to lose $3.2 billion of principal investments. “The victims would not have invested or would have withdrawn [their] investments” if they had known the truth, Roos said.

Defense attorney Seth Levine countered that Tournant's misrepresentations were not responsible for the losses. He noted that Tournant was on medical leave in March 2020 when others at AGI liquidated the funds during the market's sharp downturn, amplifying losses.

“The driver of the loss … was the remarkable, unprecedented events of the [COVID-19] crisis,” Levine argued.

Judge's Decision

Judge Swain ultimately sided with the defense, determining the government had failed to prove Tournant's dishonesty caused the $3.2 billion loss. With the loss amount deemed zero, sentencing guidelines recommended six to 12 months in prison.

Swain expressed concern for Tournant’s health, stating she was unconvinced the Federal Bureau of Prisons could provide adequate care. While calling his actions “serious and systemic,” the judge highlighted his unique medical circumstances as a reason to forego incarceration.

Broader Case and Aftermath

Allianz resolved related allegations in May 2022, agreeing to pay over $6 billion. Its U.S. subsidiary, AGI, pleaded guilty to securities fraud, alongside former managing directors Stephen Bond-Nelson and Trevor Taylor. Allianz has since transferred AGI’s investment management operations to Voya Financial.