Banco Master CEO Denies $2.4 Billion Fraud as Bank Is Liquidated

(Bloomberg) -- The chief executive officer of Brazil’s failed bank Banco Master SA denied accusations of fraud that led the lender to liquidation last Tuesday, one of the biggest of its kind in the country.

Daniel Vorcaro’s attorneys said there was no fraud in operations probed by Brazil’s officials. They also said Vorcaro himself was never probed by Brazilian central bank.

In the statement, the attorneys referred to 12.8 billion reais ($2.4 billion) mentioned by local media as allegedly fraudulent credit portfolios Master was said to have sold to Banco de Brasilia SA. 

Banco de Brasilia, which is controlled by Brazil’s capital city, said Friday it had replaced more than 10 billion reais from such portfolios, and the rest has no direct exposure to Banco Master.

“The fundamentals behind the probe against Daniel Vorcaro are a non-existent fact until this point,” Vorcaro’s lawyers said in a statement Saturday. “There is no 12 billion reais fraud.”

Vorcaro was arrested last Monday by Brazil’s federal police on accusations that his bank had fabricated false credit operations that were later sold to Banco de Brasilia SA. The executive’s lawyers said that the portfolios targeted in the probe weren’t effectively transferred, and that Banco de Brasilia effectively bought other portfolios, which were not included in the probe.

“On the operations which didn’t follow the standards, Banco Master in good faith replaced the portfolios originated by third parties, and started a process to buy back the remaining balances,” his representatives said. 

Vorcaro was arrested Monday night in a Sao Paulo airport, where authorities said he was trying to flee the country. He later denied he was attempting to flee, and said he was leaving Brazil for a potential business deal.

Hours after his arrest, Brazil’s central bank put Banco Master into liquidation, in a dramatic new turn for a bank that grew fast in the last few years using what critics said were opaque and risky assets. 

Master’s liquidation will lead the country’s deposits insurance fund, known as FGC, to pay investors who bought Master’s bonds. FGC said the lender had around 1.6 million creditors which were owed roughly 41 billion reais, but the amount could jump to as much as 55 billion reais, a person familiar with the matter told Bloomberg News Tuesday.

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