NASSAU, BAHAMAS: A Bahamas-licensed investment fund faces winding-up proceedings in the Supreme Court after the liquidator of a failed Brazilian bank alleged that approximately $1.6 billion was diverted from the bank and its subsidiaries into a corporate structure headed by the Bahamian fund.
FAEX Fund Ltd., a Bahamas-incorporated SMART Fund, is the subject of a winding-up petition brought by Banco Master S.A., acting through its Brazilian liquidator, EFB Regimes Especiais de Empresas Ltda.
The substantive petition is scheduled to be heard before Chief Justice Sir Ian Winder on Thursday, October 8, at 10 a.m., according to an October 1 press release. The release states that the hearing remains subject to further direction from the court.
The proceedings follow the liquidation of Banco Master, which was placed into extrajudicial liquidation by the Central Bank of Brazil on November 18, 2025.
In an affidavit supporting the winding-up petition, Eduardo Felix Bianchini, manager and shareholder of EFB, alleges that FAEX formed part of a multilayered corporate structure through which substantial assets or value belonging to Banco Master and its subsidiaries were wrongfully diverted, held or concealed.
The allegations are before the court and have not been finally determined.
According to Bianchini’s affidavit, Banco Master is seeking to wind up FAEX on two alternative grounds: that the fund is insolvent or that it is just and equitable for it to be wound up. The petition is presented on the basis that Banco Master is a contingent creditor of FAEX.
The affidavit identifies approximately $1.168 billion in value that the liquidator alleges was diverted directly from Banco Master into the FAEX structure. It also identifies alleged transfers involving subsidiaries of the Brazilian bank, bringing the minimum alleged diversion from the wider group into the structure to approximately $1.618 billion.
The liquidator distinguishes between Banco Master’s own creditor claim and losses attributed to its subsidiaries, which would have to submit separate proofs of debt if the winding-up petition succeeds.
Bianchini’s affidavit also provides preliminary estimates of Banco Master’s wider financial position. It places the bank’s liabilities at approximately $13 billion and the estimated value of its assets at $4.5 billion as of November 18, 2025.
The liquidator further estimates that approximately $11.6 billion in assets may have been fraudulently diverted or taken from Banco Master and its subsidiaries between 2018 and November 2025. Bianchini acknowledges that these estimates are preliminary because the investigation and examination of financial records remain ongoing.
The affidavit raises separate concerns about FAEX’s operations and corporate governance.
Bianchini alleges that the Bahamian fund had no employees, conducted no identifiable legitimate trading activity and provided no goods or services. He further alleges that it had no independent means of generating revenue or capital sufficient to explain the value associated with its corporate structure.
The affidavit identifies a $36.46 million transfer from FAEX’s account at Winterbotham in The Bahamas to an account maintained with Planner Trustee DTVM in Brazil on February 22, 2022. It also identifies transfers totalling approximately $1.53 million from FAEX accounts in Brazil to its Winterbotham accounts between September 2023 and July 2024.
On corporate governance, Bianchini states that FAEX’s two directors resigned on January 19, 2026, leaving the fund without directors. The affidavit also refers to the resignation of the directors of FAEX’s sole shareholder, Gandstone Participations Limited.
The liquidator cites these circumstances among the grounds supporting its application to wind up the fund.
The affidavit also refers to financial filings made by Nauatle, an entity within the FAEX structure, to Brazil’s securities regulator.
According to those filings, Nauatle reported approximately $13.2 billion in total assets and $10.4 billion in net shareholders’ equity as of March 31, 2026. By May 31, its reported total assets had fallen to approximately $6.6 billion, while net assets stood at approximately $5.2 billion.
Bianchini alleges that the reduction indicates that value within the FAEX structure may have been dissipated. He acknowledges that the precise value held by FAEX and its subsidiaries has not yet been determined.
The proceedings follow an earlier Supreme Court decision recognising the Brazilian liquidator’s authority to act in The Bahamas.
In a ruling dated May 26, 2026, Acting Justice Raynard S. Rigby KC granted EFB recognition as a foreign representative under Section 254(1)(a) of the Companies Act, allowing it to act on behalf of Banco Master and four related Brazilian entities.
That judgment concerned recognition of the foreign liquidator. It did not determine the allegations underlying the subsequent FAEX winding-up petition.
The Supreme Court appointed Bahamian forensic accountant John S. Bain, Kevin Hellard of Grant Thornton UK and John Skelton of Grant Thornton BVI as joint provisional liquidators of FAEX on August 6. Their appointment remains in effect pending determination of the winding-up petition or further order of the court.
The three have been tasked with preserving and protecting FAEX’s assets and records, including assets held directly or indirectly through the wider corporate structure, while the petition remains before the Supreme Court.
FAEX was incorporated in The Bahamas on February 20, 2017, and is identified in the court documents as a licensed SMART Fund.
The substantive winding-up hearing is scheduled for October 8. The allegations of fraud, asset diversion and other misconduct remain allegations contained in the liquidator’s court filings and have not been finally determined by the court.
