By Luc Cohen and Jonathan Stempel

NEW YORK (Reuters) -A former Allianz (ETR:) fund manager pleaded guilty on Friday over his role in a meltdown of private investment funds sparked by the pandemic that caused an estimated $7 billion of investor losses.

Gregoire Tournant, 57, of Basalt, Colorado, admitted to two counts of investment adviser fraud at a hearing before Chief Judge Laura Taylor Swain of the federal court in Manhattan.

He faces up to 10 years in prison at his Oct. 16 sentencing. Tournant also agreed to give up $17.5 million in ill-gotten gains, including bonuses that were inflated by his fraud.

The case stemmed from the March 2020 collapse of the German insurer’s now-defunct Structured Alpha funds, which Tournant had created and oversaw as chief investment officer.

In May 2022, Allianz agreed to pay more than $6 billion and its U.S. asset management unit pleaded guilty to securities fraud to resolve government probes into the collapse. Two other former Allianz fund managers pleaded guilty at the time.

The Structured Alpha funds had bet heavily on stock options, in a manner designed to limit losses in a market selloff, which Tournant likened to a form of insurance.

Prosecutors said Tournant misled investors about the funds’ risks by altering performance data and diverging from his promised hedging strategy, and obstructed a U.S. Securities and Exchange Commission probe by directing a colleague to lie.

The funds once had more than $11 billion of assets under management, but lost about $7 billion in February and March 2020 as the start of the pandemic set off a worldwide market panic.

Before pleading guilty, Tournant admitted to providing deceptive information to investors. 

“I knew this conduct was wrongful,” Tournant told the judge.

Prosecutors said the fraud ran from 2014 through March 2020, with Tournant being paid more than $60 million over that time.

Tournant previously pleaded not guilty to five criminal counts including investment adviser fraud, securities fraud, conspiracy and obstruction.

He had also accused the law firm Sullivan & Cromwell, which had represented him and Allianz, of making him a scapegoat after Allianz decided to cooperate with federal prosecutors.

Swain rejected Tournant’s request to dismiss the criminal case last August.

The case is U.S. v. Tournant, U.S. District Court, Southern District of New York, No. 22-cr-00276.