A major federal court ruling in Brazil has halted a massive R$ 4.2 billion ($730 million USD) payout to a sugarcane mill, throwing a wrench into a controversial multi-billion dollar financial strategy orchestrated by Banco Master.
The Federal Regional Court of the 2nd Region (TRF2) unanimously ordered a fresh expert audit into historical losses claimed by the Cambahyba sugarcane plant, reversing a previous decision that had cleared the multi-billion payout.
The Disputed Billions
The case stems from government pricing interventions in the sugar-alcohol sector during the 1980s and 1990s. Cambahyba claimed massive losses from this era, leading a lower court to award them a R$ 4.2 billion compensation package in the form of precatórios—court-ordered government debt bonds.
However, Brazil’s Attorney General’s Office (AGU) appealed the decision, pointing out "grave material errors" in how the debt was calculated. The AGU argued that the mill’s daily production books were insufficient to prove actual economic loss and demanded to see real sales invoices.
Agreeing with the government, TRF2 Judge Ferreira Neves warned against "unjust enrichment" at the taxpayer's expense, stating that compensating a company based on theoretical tables rather than real accounting could turn damages into an "unjustified prize."
Banco Master’s Financial Playbook
This ruling is a significant blow to Banco Master, led by banker Daniel Vorcaro. Cambahyba is one of several sugarcane mills that sold their judicial debt securities to the bank.
Buying up these precatórios at steep discounts—often for just 10% to 20% of their face value—was a core strategy for Banco Master. By purchasing the distressed debt cheap and then registering the full, multi-billion-dollar face value of the titles on its balance sheets, the bank was able to artificially inflate its financial standing. Reports show Banco Master held at least R$ 16 billion in these judicial assets, with R$ 10 billion tied specifically to the sugarcane sector.
A Growing Crackdown
The setback on the R$ 4.2 billion payout is part of a larger, coordinated regulatory crackdown. Recently, the National Justice Council (CNJ) canceled 16 other sugarcane-related precatórios linked to Banco Master, returning another R$ 4.7 billion to public coffers.
The legal battle has also sparked political friction. Attorney General Jorge Messias publicly celebrated the freeze, framing the action as a victory for public funds. With billions of reals in balance-sheet assets now on thin ice, Banco Master faces a challenging path ahead to justify its aggressive financial engineering.
