NEW YORK - A former Allianz fund manager was spared prison time on Friday over his role in a meltdown of private investment funds sparked by the COVID-19 pandemic that caused an estimated $7 billion of investor losses.

Gregoire Tournant, 57, of Basalt, Colorado, pleaded guilty in June to two counts of investment adviser fraud. He agreed to give up $17.5 million in ill-gotten gains, including bonuses that were inflated by his fraud. 

Chief Judge Laura Taylor Swain of the federal court in Manhattan sentenced him to 18 months home confinement and three years probation.

Tournant's defense lawyers had urged Swain to spare him prison time, citing health issues. They also said Tournant had expressed remorse, and called the case less serious than the typical investment adviser fraud scheme.

"We are deeply appreciative to the Court for imposing this just sentence and recognizing that incarceration was not appropriate in this case," defense lawyers Seth Levine and Daniel Alonso said in a statement.

Prosecutors with the U.S. Attorney's office in Manhattan had recommended that Tournant be sentenced to at least seven years in prison. They argued that more than 100 investors in Tournant's funds lost billions of dollars when they collapsed, and that he continued to minimize the importance of what he had done.

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.

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