Pension funds and other investors suing AGI claim that was far worse than at other funds hit hard by the start of the pandemic and say the firm breached its fiduciary duty by misleading them about how Structured Alpha was investing their money.
Attempt to Obstruct
Prosecutors say Tournant also tried to obstruct a government probe.
“In or about the summer of 2020, after the onset of the pandemic and in order to avoid detection of the fraudulent scheme, Gregoire Tournant, the defendant, obstructed an investigation by the U.S. Securities and Exchange Commission (the ‘SEC’) into the circumstances that led to the losses in March 2020. Among other things, Tournant repeatedly directed Stephen Bond-Nelson, a portfolio manager for the funds, to lie to the SEC.”
The funds were marketed as “providing broad market exposure while maintaining specific risk protections to safeguard against losses in the event of a market crash,” according to the indictment.
But in late 2015, Tournant allegedly grew frustrated with the cost of hedging, which was eating into returns. The fund “abandoned the promised hedging strategy and instead began to purchase cheaper hedges that were further out of the money, and therefore less protective in the event of a market crash,” according to the indictment. That change was not disclosed to investors, prosecutors allege.
When pandemic-related market volatility hit in 2020, the funds lost more than $7 billion and were ultimately shut down.
The case is US v. Tournant, 22-cr-00276, U.S. District Court, Southern District of New York (Manhattan).
--With assistance from Greg Farrell.
This article was provided by Bloomberg News.