Brazil's Central Bank Under Scrutiny Following Banco Master Liquidation Amid Fraud Allegations

Central Bank Liquidates Banco Master Amid Regulatory Breaches

Brazil's Central Bank ordered the extrajudicial liquidation of Banco Master SA on November 18, 2025, citing severe regulatory violations, a sharp deterioration in its finances, and a profound liquidity crisis. The decision, signed by Central Bank president Gabriel Galípolo, also encompassed Master SA Corretora de Câmbio, Banco Letsbank S.A., and Banco Master de Investimento S.A. . This action followed months of investigations into the bank's operations and alleged fraudulent activities . The Central Bank appointed EFB Regimes Especiais de Empresas as the liquidator, granting it broad authority to manage and dismantle the financial group's assets .

Judicial Scrutiny Intensifies from Supreme Court and Audit Court

The Central Bank's decision to liquidate Banco Master has drawn significant scrutiny from Brazil's highest judicial bodies. Both the Supreme Court (STF) and the Federal Court of Accounts (TCU) are demanding details regarding the liquidation process . Supreme Court Justice Dias Toffoli has scheduled a crucial hearing for December 30, 2025, as part of a broader fraud investigation . This hearing is expected to involve Daniel Vorcaro, owner of Banco Master; Paulo Henrique Costa, former president of BRB (Banco de Brasília); and Ailton de Aquino, the Central Bank's supervisory head . The TCU has also given the Central Bank a deadline to present its defense and explain the grounds for the liquidation .

Allegations of Fraud and High-Profile Connections

The liquidation of Banco Master is intertwined with a sprawling federal police fraud investigation. Federal police uncovered a 12-billion Brazilian reais ($2 billion) fraud scheme within the country's banking system, focusing on the issuance of fraudulent credit securities . Daniel Vorcaro, Banco Master's owner, was arrested in connection with the investigation, though he was later released under habeas corpus . Allegations suggest that BRB, a state-run lender, knowingly participated in the alleged fraud by purchasing credit securities from Master, some reportedly tied to non-existent assets . Transfers between the two lenders reportedly totaled 16.7 billion reais between July 2024 and October 2025 . Furthermore, Senator Alessandro Vieira is seeking to establish a parliamentary inquiry commission (CPI) to investigate allegations involving Banco Master and the family of Supreme Court Justice Alexandre de Moraes, whose wife, Viviane Barci de Moraes, reportedly had a significant legal services agreement with the bank .

Financial Fallout and Creditor Compensation

The fallout from Banco Master's liquidation is substantial. The Credit Guarantee Fund (FGC) is preparing to compensate approximately 1.6 million creditors, with an estimated payout ranging from 41 billion reais ($7.4 billion to $7.71 billion) . The FGC aims to begin payments within an average of 30 days after receiving the complete client database from Banco Master . Assets belonging to Banco Master and its current and former administrators have been seized and frozen as part of the ongoing process . The Central Bank emphasized that while Banco Master represented a minimal percentage of Brazil's financial system, its liquidation was necessary to contain risks and ensure an orderly removal from the National Financial System .