May 24, 2022

USA: SEC Charges Allianz Global Investors With Fraudulent Scheme That Led Pension Funds For Teachers, Clergy, Engineers, And Other Americans To Lose Billions Of Dollars LIKE MELVIN CAPITAL.

US Securities and Exchange Commission (SEC)
Tuesday May 17, 2022

The Securities and Exchange Commission (SEC) today charged Allianz Global Investors U.S. LLC (AGI US) and three former senior portfolio managers with a massive fraudulent scheme that concealed the immense downside risks of a complex options trading strategy they called “Structured Alpha.” AGI US marketed and sold the strategy to approximately 114 institutional investors, including pension funds for teachers, clergy, bus drivers, engineers, and other individuals. After the COVID-19 market crash of March 2020 exposed the fraudulent scheme, the strategy lost billions of dollars as a result of AGI US and the portfolio managers’ misconduct. AGI US has agreed to pay billions of dollars as part of an integrated, global resolution, including more than $1 billion to settle SEC charges and together with its parent, Allianz SE, over $5 billion in restitution to victims.

"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. This case once again demonstrates that even the most sophisticated institutional investors, like pension funds, can become victims of wrongdoing. Unfortunately, we’ve seen a recent string of cases in which derivatives and complex products have harmed investors across market sectors. The Commission stands ready to use all appropriate tools to protect investors, including upholding prohibitions against certain activities by the guilty parties. I’d like to thank and commend our staff for their excellent forensic work that uncovered this fraud and held the wrongdoers accountable."

The SEC’s complaint, filed in the federal district court in Manhattan, alleges that Structured Alpha’s Lead Portfolio Manager, Gregoire P. Tournant, orchestrated the multi-year scheme to mislead investors who invested approximately $11 billion in Structured Alpha, and paid the defendants over $550 million in fees. It further alleges that, with assistance from Co-Lead Portfolio Manager, Trevor L. Taylor, and Portfolio Manager, Stephen G. Bond-Nelson, Tournant manipulated numerous financial reports and other information provided to investors to conceal the magnitude of Structured Alpha’s true risk and the funds’ actual performance.

Defendants reduced losses under a market crash scenario in one risk report sent to investors from negative 42.1505489755747% to negative 4.1505489755747% -- by simply dropping the single digit 2. In another example, defendants “smoothed” performance data sent to investors by reducing losses on one day from negative 18.2607085709004% to negative 9.2607085709004% -- this time by cutting the number 18 in half.

When the 2020 COVID-related market volatility revealed that AGI US and the defendants had misled investors about the fund’s level of risk, the fund suffered catastrophic losses and investors lost billions; the defendants all the while profited from their deception. The complaint further alleges that Tournant, Taylor, and Bond-Nelson then made multiple, ultimately unsuccessful, efforts to conceal their misconduct from the SEC, including false testimony and meetings in vacant construction sites to discuss sending their assets overseas.

"From at least January 2016 through March 2020, the defendants lied about nearly every aspect of a highly complex investment strategy they marketed to institutional investors, including pension funds managing the retirement savings of everyday Americans. While they were able to solicit over $11 billion in investments by the end of 2019 and earn over $550 million in fees as a result of their lies, they lost over $5 billion in investor funds when the market volatility of March 2020 exposed the true risk of their products," said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. "Following the crash of the Structured Alpha Funds, the defendants continued their pattern of deceit by lying to SEC staff and their fraud would have gone undetected if it weren’t for the persistence of SEC lawyers who pieced together the full scope of the massive fraud."

AGI US admitted that its conduct violated the federal securities laws and agreed to a cease-and-desist order, a censure and payment of $315.2 million in disgorgement, $34 million in prejudgment interest, and a $675 million civil penalty, a portion of which will be distributed to certain investors, with the amount of disgorgement and prejudgment interest deemed satisfied by amounts it paid to the U.S. Department of Justice as part of an integrated, global resolution. In a parallel criminal proceeding, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges for similar conduct against AGI US, Tournant, Taylor, and Bond-Nelson. As part of the parallel criminal proceeding, AGI US, Taylor and Bond-Nelson have agreed to guilty pleas.

The SEC’s complaint seeks permanent injunctions, disgorgement plus interest, and penalties against Tournant, Taylor, and Bond-Nelson. In addition, the complaint seeks an officer and director bar against Tournant. Taylor and Bond-Nelson have agreed to the entry of partial judgments against them in which they consent to injunctive relief with monetary relief to be determined by the court in the future. These settlements are subject to court approval. Taylor and Bond-Nelson also agreed to associational and penny stock bars.

As a consequence of the guilty plea, AGI US is automatically and immediately disqualified from providing advisory services to US registered investment funds for the next ten years, and will exit the business of conducting these fund services. To avoid disruptions to these funds and for the protection of the fund investors, the SEC will allow a brief transition period solely to transition these services to another investment adviser. The transition period will be ten weeks for the US mutual funds that AGI US sub-advises and four months for the US closed-end funds that AGI US advises.

The SEC’s investigation was conducted by Jonathan C. Shapiro and James F. Murtha, and supervised by Reid A. Muoio of the Complex Financial Instruments Unit. The litigation will be led by Timothy K. Halloran under the supervision of Melissa J. Armstrong. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the U.S. Postal Inspection Service.
written by Staff
Sunday May 15, 2022

The largest public pension in America loaded up a high-profile meme stock, and tech stocks, and cut back on a streaming giant before the shares went on their latest plunge.

California Public Employees’ Retirement System bought more shares of movie-theater chain AMC Entertainment Holdings (ticker: AMC), chip maker Advanced Micro Devices ( AMD ), and Square parent Block (SQ), and slashed its investment in Netflix (NFLX) in the first quarter.

Calpers, as the pension is known, disclosed the stock trades, among others, in a form it filed with the Securities and Exchange Commission.

The pension declined to comment on the investment changes. It manages $450 billion in assets, more than any other public pension in the U.S.

Calpers bought 155,992 AMC shares to end the first quarter with 775,392 shares. It’s the third consecutive quarter that Calpers has bought the stock. It disclosed a stake of 116,400 shares at the end of the third quarter of 2021, and then more than quadrupled that investment in the fourth.

The stock slid 9% in the first quarter, compared with a 5% slip in the S&P 500 index . So far in the second quarter, shares have tumbled 51%, compared with an 11% drop in the index.

In 2021, AMC shares were one of the more high-profile meme trades, stocks that surged as everyday investors took to social media apps to egg each other on to buy. Last week, the company’s first quarter beat expectations. Analysts noted the growth at the box office.

AMD is seeing more growth, and its latest quarter showed market gains at the expense of rival Intel (INTC). AMD’s data-center business and the closing the acquisition of Xilinx will cut the company’s exposure to PCs, which is an area that investors are worried will show slowing demand.

Calpers bought 663,283 more shares to end the first quarter with 3.3 million shares. The stock dropped 24% in the first quarter; so far in the second, it is down 13%.

The pension also bought 96,369 additional Block shares, raising its investment to 860,876 shares. The stock fell 16% in the first quarter; so far in the second, it has tumbled 48% .

Growth stocks like Block have been hammered this year, but the company has shown signs of resilience. Block’s first quarter, reported in the first week of May, missed estimates, but shares rose on the surge in gross profit for its Cash App. Earlier this year, analysts had been upbeat on Block’s app.

Netflix is a stock that Wall Street has been losing faith in, particularly because of its disappointing latest quarterly report, and awful outlook that called for the net loss of millions of subscribers. With the update, Netflix lost a bull, Bill Ackman, whose Pershing Square hedge fund sold its stake at a loss.

Calpers sold 605,501 Netflix shares to end the first quarter with 1.2 million shares. The stock dropped 38% in the first quarter; so far in the second, it is down 50%.
written by Josh Beckerman, WSJ
Tuesday May 24, 2022

The Securities and Exchange Commission alleges that TradeZero America Inc. and co-founder Daniel Pipitone deceived customers about restricting meme stock purchases in January 2021.

Trading platform TradeZero and Mr. Pipitone agreed to a cease-and-desist order, without admitting or denying the charges, the SEC said. The order includes penalties of $100,000 for TradeZero and $25,000 for Mr. Pipitone.

In October, TradeZero said it would combine with blank-check company Dune Acquisition Corp., but Dune said May 3 that it determined the deal "is not advisable or fair to, or in the best interest of, Dune and its stockholders" and called for Dune stockholders to vote against the transaction.

The SEC order said that on Jan. 28, 2021, "TradeZero's clearing broker instructed all of its introducing brokers, including TradeZero, to halt all purchases in GME, AMC, and KOSS."

"TradeZero refused to implement this instruction for over two hours, allowing its customers to freely trade. Under increasing pressure from the clearing broker," TradeZero's board decided to implement the restriction, the order said. "TradeZero ultimately halted purchases for about 10 minutes," according to an SEC press release.

According to the order, Mr Pipitone said on Reddit "that some trading firms are blocking these symbols is disgusting, unprecedented" and didn't disclose that TradeZero also blocked three symbols. The order also mentioned a Jan. 29, 2021, TradeZero press release "promoting its resistance to the clearing broker's restrictions."
๐Ÿšจ๐Ÿ‘‡ FLASHBACK TO EARLY 2021 ๐Ÿ‘‡๐Ÿšจ

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