Brazil’s Supreme Court Justice Steps Down from Billion-Dollar Banking Scandal

Justice Dias Toffoli has been forced to step down from overseeing Brazil’s biggest banking fraud case after police found his name in messages on the suspect’s phone.

The Dramatic Exit

Justice Dias Toffoli stepped down from overseeing the Banco Master investigation after a four-hour closed-door meeting of all ten justices. The trigger was a 200-page Federal Police report containing messages from Daniel Vorcaro’s phone — the detained founder of the bank — that directly mentioned Toffoli. Sources told multiple outlets he initially refused to step aside but found himself completely isolated when every colleague disagreed. Justice André Mendonça was drawn by lottery as the new lead judge.

A Web of Connections

His family’s company sold resort stakes to a fund linked to Vorcaro’s circle in 2021. The day after being assigned the case, he flew by private jet to Peru alongside a lawyer defending one of the suspects. The report delivered to Fachin details exchanges of messages between Vorcaro and his brother-in-law, Fabiano Zettel, in which they discuss payments destined for the company Maridt, of which Toffoli is a partner. In the conversations, Vorcaro and Zettel mention the minister’s name when discussing financial transfers related to the purchase of a resort. Despite these connections, Brazil’s Supreme Court Justice Dias Toffoli said on Thursday he has never received any payments and has never had any relationship with Banco Master’s controlling shareholder Daniel Vorcaro. Finally, the Justice clarifies that he has never received any money from Daniel Vorcaro or his brother-in-law Fabiano Zettel.

The Banco Master Scandal

When Brazilian businessman Daniel Vorcaro was arrested last year over what may be the country’s biggest ever banking fraud scandal, he boasted to police that he had friends in high places. The collapse of his Master Bank and a snowballing fraud investigation are becoming an ever-bigger headache for authorities, exposing a web of links between financiers, top judges and politicians across the spectrum in an election year. Authorities liquidated Master Bank, leaving more than $7 billion in debt due to some 800,000 investors who have received payouts from Brazil’s deposit guarantee fund. Daniel Vorcaro is accused of creating fraudulent credit instruments and selling them to others in what would amount to a crime against the financial system. He has denied wrongdoing and has said he’s cooperating with police.

Political Fallout

Opposition senators filed fresh impeachment motions, bringing petitions against Toffoli to at least 25. Some legislators are negotiating a political trade: removing Toffoli in exchange for filling the vacancy with former Senate President Rodrigo Pacheco. President Lula, who appointed Toffoli in 2009 when the justice was 41 and had twice failed qualifying exams for lower judgeships, added an awkward footnote last week by calling for nominees with greater legal expertise. Comparisons to the Carwash bribery scandal that rocked Brazil a decade ago are becoming more frequent.

Institutional Crisis

The collapse of a small but politically connected Brazilian lender is pulling the country’s Supreme Court into what is shaping up to be its most serious credibility crisis since the return of democracy more than four decades ago. The maneuver spared the court from having to formally declare Toffoli’s bias — which would have voided months of proceedings — but did nothing to silence the growing chorus calling the arrangement a cover-up. With 54 Senate seats up for renewal and institutional credibility in freefall, the crisis is nowhere near over.