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XP Investimentos to reimburse clients defrauded in pyramid scheme

Brazil-based XP Investimentos Corretora de Câmbio Títulos e Valores Mobiliários SA said it will reimburse customers affected by a financial pyramid scheme organized by an autonomous investment agent connected to its BankRio/Invest Smart network, Valor Econômico reported.

The scheme purportedly was carried out by André Luiz da Motta e Albuquerque, an independent agent linked to the investment platform since 2016. Albuquerque created a company called AI e Albuquerque Consultoria, which he used to raise funds from investors with the promise of significant profit. The agent also told the clients that the transactions were unrelated to BankRio or XP Investimentos.

The fraud allegedly resulted in about 20 million reais in losses for the investors who channeled funds to Albuquerque's company.

XP Investimentos learned about the fraud Feb. 28 after receiving a complaint from an investor. It later reported the scheme to the CVM securities and exchange commission and the Brazilian central bank.

On the same day, XP Investimentos dismissed Albuquerque, who subsequently died by suicide.

In a statement, XP Investimentos said the fraud is an isolated case, noting that no transaction was carried out within its platform and funds were never remitted to the company. "The company clarifies that it has no connection with what happened. The event was totally isolated and caused by an individual who acted as an investment adviser, but who also performed irregular parallel activities," the note from XP said.

Still, the firm said that it would reimburse affected investors, "even if legally we have no responsibility."

The CVM told Valor that it does not comment on specific cases, but "monitors and analyzes information and transactions involving participants of the capital market, taking the appropriate measures, whenever necessary." Once the CVM detects fraud, it will pass the case to the federal police and the federal prosecutor's office as it constitutes financial crime, the publication said.

As of March 8, US$1 was equivalent to 3.86 Brazilian reais.