By Jonathan Stempel

NEW YORK (Reuters) – A U.S. judge said Germany’s Allianz (DE:) SE must face investor claims it wrongly “abandoned” the investment strategies it promised to use on hedge funds that suffered massive losses as the COVID-19 pandemic shook markets early last year.

U.S. District Judge Katherine Polk Failla, Manhattan, ruled that investors can show negligence and lack of good faith by Allianz in its management of Structured Alpha funds. Some state-based claims were also rejected by her.

The decision on Thursday dealt with twelve lawsuits. This insurer is facing more than two dozen of these lawsuits and seeks at least $6 million.

Allianz funds were known for using complex options strategies in order to produce predictable returns with minimal risk. However, investors claim that the fund collapsed between February 2020 and March 2020, after Allianz quietly removed hedges intended to reduce losses.

Structured Alpha Global Equity 500 lost nearly three quarters of its assets, according to court documents. It also lags its benchmark by almost 60 percent. The liquidation of two funds that were once valued at $2.3billion locked investors in losses.

Failla said the investors could try to show that Allianz breached terms of a private placement memorandum for the funds, which she said the insurer portrayed as a “glorified advertising brochure, the substance of which () could ignore at will.”

Allianz’s lawyers didn’t immediately reply to our requests for comment. Similar requests were not answered by lawyers for the investors involved in the class action.

Allianz announced Thursday that Jacqueline Hunt, its senior asset manager, was stepping down and making changes to the board.

These changes are in response to Allianz’s August 1 announcement by the U.S. Department of Justice that it was investigating Structured Alpha funds.

Three people familiar with the matter stated earlier this September that the probe will examine whether Allianz’s fund managers misrepresented investors’ risk.

U.S. Securities and Exchange Commission (USSEC) is also investigating the fund’s collapse.

In re Allianz Global Investors US LLC Alpha Series Litigation (U.S. District Court Southern District of New York), No. 20-05615.