Brazil's securities regulator, the CVM, unanimously ruled on Tuesday (8) that former banker Daniel Vorcaro and Banco Master took part in a fraudulent capital markets operation tied to a real estate investment fund. Vorcaro was fined R$ 20 million, and the bank, already under liquidation by the central bank, R$ 12.5 million. According to Folha de S.Paulo, the fraud fines imposed on all defendants in the case add up to R$ 201 million.
The hearing began at 3 p.m. at the regulator's headquarters in downtown Rio de Janeiro and was open to the press and the public. Reporting director João Accioly voted to find the defendants liable and was followed by the rest of the board, according to news site G1. The ruling is administrative in nature, comparable to a sanction by the US Securities and Exchange Commission: in parallel criminal proceedings the defendants retain the presumption of innocence, and Daniel, Henrique and Felipe Vorcaro remain in preventive detention.
The scheme, according to the regulator
The case was opened in 2020 by the CVM's securities registration unit to examine the issuance and distribution of shares of the fund, called Brazil Realty by Folha and Brasil Real by G1. In the account of the CVM staff, the scheme inflated the value of properties and assets delivered to the fund through falsified or inconsistent appraisals and simulated liquidity for the shares in the secondary market to attract investors. The investigation focused on the fund's third share issuance, which raised R$ 139.1 million, most of it in physical assets with inflated values, the accusation says. Folha reports that Talent Construções, for one, subscribed R$ 28.6 million by delivering shares of Brasil Realty Empreendimentos to the fund.
Penalties, defenses and what comes next
Beyond Daniel Vorcaro, another seven people and nine companies were found liable, Folha reports. His father, Henrique Vorcaro, was fined R$ 20 million, and his cousin Felipe Vorcaro R$ 5 million. Entre Investimentos was fined R$ 10 million, and its owner Antônio Freixo Junior R$ 5 million. Valor Econômico also lists Benjamin Botelho among those sanctioned, alongside 11 other defendants.
In the case files, the defenses deny any wrongdoing and say all operations followed market rules. Vorcaro's defense says there was no individual proof of illegal conduct, while Entre Investimentos and Freixo told the CVM the accusation failed to show a fraudulent operation, trickery, inducement to error or illicit gain. Before the merits were examined, lawyers asked for the session to be postponed, a request the reporting director denied, and a settlement proposed by the defendants to end the case was rejected by the board. Henrique Vorcaro sent no lawyer, and Felipe's new counsel, who took over the case recently and only gained access to the files last week, asked for more time. Because the case took about six years from its opening to judgment, some defenses also argued the allegations should be declared time-barred.
The defenses may challenge the administrative ruling in court, a step with no date set. In testimony to the Federal Police, Daniel Vorcaro denied irregularities in the running of the bank's business, according to G1, and the three Vorcaros remain in preventive detention while criminal proceedings continue.