IRB Brasil Re CVM Case: Ex-Directors Cleared in Buffett Claim

Brazil · Markets

Brazil’s securities watchdog has drawn a sharp line between a rogue finance chief and his former boss, punishing the architect of a fabricated Warren Buffett investment story while clearing the chief executive who was deceived by it.

The fake Berkshire story that moved markets

In early 2020, a rumor swept through Brazilian markets that Berkshire Hathaway, Warren Buffett’s conglomerate, had acquired a significant stake in IRB Brasil Re, then one of the world’s largest reinsurers. IRB’s stock jumped more than 6% on the news before Berkshire publicly denied any investment, triggering a collapse of over 40%.

Brazil’s securities regulator, the Comissão de Valores Mobiliários (CVM), later concluded the story was entirely fabricated. The regulator identified then-CFO and investor relations head Fernando Passos as the source of the false information.

For a foreign reader, the CVM plays a role similar to the US. Securities and Exchange Commission. It oversees Brazil’s capital markets, investigates misconduct, and can impose fines, trading bans, and other sanctions on companies and individuals who break securities laws.

Its decisions can be appealed through the courts, but a ruling from the full board carries significant weight in setting standards for corporate behavior across Latin America’s largest economy.

CVM’s split decision: CFO cleared, CEO cleared

Former CEO José Carlos Cardoso, however, was unanimously acquitted of negligence. Director Daniel Maeda found no evidence of bad faith, noting that Cardoso was misled by deceptive tactics employed by Passos and that chief executives may delegate responsibilities.

The distinction the CVM drew here matters well beyond this single case. By absolving the CEO while penalizing the CFO, the regulator signaled that top executives are not automatically liable for every act committed by their subordinates.

A chief executive who relies on internal controls and delegated reporting lines, and who shows no sign of having knowingly participated in a scheme, can be treated differently from the person who actually orchestrated the deception. That principle is closely watched by boardrooms across Brazil, where family-controlled and publicly traded firms alike are still adapting to stricter governance expectations.

A separate 2026 case does not overturn the fraud finding

In June 2026, a different CVM proceeding evaluated other alleged infractions by the same former directors. That case examined whether Passos selectively disclosed confidential information and whether Cardoso authorized compensation payments above shareholder-approved limits.

It is important to understand that this second proceeding did not revisit the core Berkshire fraud. Instead, it focused on distinct governance questions: who knew what about internal financial data, and whether bonus approvals followed proper corporate procedures.

The fact that the board suspended its judgment twice before reaching a decision suggests the evidence was complex and the legal arguments finely balanced. Observers are now asking whether the CVM will issue formal guidance to help companies distinguish between a rogue employee’s hidden actions and a systemic control failure that should attract board-level liability.

U.S. authorities reinforce the fraud narrative

The Brazilian decision aligns with actions taken by American regulators. The U.S. Securities and Exchange Commission charged Passos with fraud for planting the false story and disseminating fake documents, and he later agreed to a final consent judgment involving penalties and an officer-director bar.

The U.S. Department of Justice described Passos’s conduct as a securities fraud scheme designed to prop up IRB’s stock. IRB itself entered a non-prosecution agreement with the DOJ and agreed to pay $5 million in compensation to affected shareholders.

Cross-border coordination of this kind has become more common as Brazilian companies with American depositary receipts or U.S. investors fall under multiple jurisdictions. When the SEC and the CVM pursue parallel cases, it can strengthen the factual record, but it also raises practical questions about whether penalties imposed in one country should be credited in the other and how a company can settle with one authority without prejudicing its defense elsewhere.

The wider accounting scandal at IRB

The Berkshire rumor was part of a broader governance crisis at IRB. In early 2020, asset manager Squadra Investimentos published a report alleging IRB’s accounting profits were artificially inflated, triggering a sharp price drop and formal CVM investigations.

Internal probes by KPMG and law firm Felsberg identified former directors involved in accounting irregularities. Some former board members reached settlement agreements with the CVM, paying fixed amounts to close cases without a formal finding of guilt, a practice criticized by investor associations as too lenient.

These settlements, known in Brazil as “termos de compromisso,” allow a defendant to pay a sum and walk away without admitting or denying wrongdoing. Regulators value them because they conserve resources and deliver money to harmed investors faster than a full trial.

Critics argue they can allow serious misconduct to go unpunished and leave the market without a clear public ruling on what exactly happened. The debate over whether the CVM should use them more sparingly in high-profile fraud cases is likely to intensify as Brazil’s retail investor base continues to grow.

Frequently Asked Questions

What was the false Berkshire Hathaway claim?
In 2020, IRB Brasil Re’s then-CFO Fernando Passos planted a fabricated story that Warren Buffett’s Berkshire Hathaway had acquired a significant stake in the Brazilian reinsurer. The stock rose over 6% before Berkshire publicly denied any investment, causing shares to plummet more than 40%.

What happened in the United States over the same case?
The SEC charged Passos with fraud, and he later agreed to a consent judgment with penalties and an officer-director bar. The U.S. Department of Justice described the scheme as securities fraud, and IRB entered a non-prosecution agreement, paying $5 million in victim compensation.

Sources: Comissão de Valores Mobiliários (CVM).

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