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German insurer Allianz will pay more than $6 billion and its investment firm has agreed to plead guilty to a charge of securities fraud over the collapse of a group of hedge funds that wiped out public pension investments, religious organizations, foundations and other investors.

The investment advisory firm Allianz that managed hedge funds failed to stop a fraud scheme that emerged after the funds collapsed early in the pandemic, according to court filings filed by federal prosecutors on Tuesday.

Prosecutors said three former Allianz portfolio managers, including the fund’s former chief investment officer, misled fund investors by concealing the risks they faced. The former CEO, Gregoire Tournant, was also accused of trying to hide the scheme: He was charged with a series of criminal charges including conspiracy, securities fraud and obstruction of justice.

Two other portfolio managers, Stephen Bond-Nelson and Trevor Taylor, agreed in February to plead guilty to charges including securities fraud, according to court documents disclosed Tuesday.

As a result of her guilty plea, Allianz said it would no longer be allowed to advise certain types of funds in the United States, and at the same time announced that it had reached an initial deal to transfer about $120 billion in asset management to a new partner. Allianz said it is in talks with Foya Financial, a New York-based company, and an agreement will be finalized in the coming weeks.

The investigation focused on the company’s Alpha structured funds, which lost about $7 billion at the start of the Covid-19 pandemic as shares suffered huge losses.

But the authorities said the seeds of this destruction were planted years earlier. Investigators said Allianz officials misled investors about the funds’ level of risk and altered documents to make the funds appear safer than they were.

Federal prosecutors and the Securities and Exchange Commission began investigating after the funds collapsed, and Allianz had been telling investors for months that it had committed billions of dollars to solve the matter.

The regulator said Allianz had agreed to pay more than $5 billion in compensation to investors and more than $1 billion to the government to resolve the Securities and Exchange Commission’s inquiry.

The indictment against Mr. Tornant said he sought to obstruct the SEC’s investigation and repeatedly instructed a former portfolio manager to lie to investigators.

Tornant, 55, voluntarily surrendered to authorities in Denver on Tuesday morning, according to a spokesperson for Damian Williams, the US attorney general for the Southern District of New York. Tornant’s lawyer, Dan Alonso, could not immediately be reached for comment.

In a statement, Allianz said the misconduct was “limited to a handful of individuals” who no longer work for the company.

The company’s representatives were expected to appear in federal court to plead guilty in favor of its investment arm. Mr. Bond Nelson and Mr. Taylor, two portfolio managers who have agreed to plead guilty to their role in the scheme, have agreed to settle with the Securities and Exchange Commission (SEC).

“Allianz Global Investors has admitted to defrauding investors over many years, concealing the losses and downside risks of a complex strategy, and its failure to implement key risk controls,” said Gary Gensler, Chairman of Allianz Global Investors. “Victims of this misconduct include teachers, clergy, bus drivers and engineers, whose pensions are invested in institutional funds to support their retirement.”

Misrepresentations of investors have been around since 2016, according to investigators. This helped the company generate $400 million in net profit from money management and significant bonuses to former portfolio managers.

A statement of facts, which is part of the acknowledgment documents by Allianz investment company, said the company “has made false and misleading statements to existing and potential investors who have significantly underestimated the risks to the funds, and also exaggerated the level of independent risk control over funds.”

Authorities said a book prepared for investors misrepresented the steps the fund had taken to hedge its investments. Portfolio managers have also “softened” the returns generated by the funds to make their performance appear more predictable.

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