Brazil's Banco Master scandal becomes central issue ahead of presidential runoff

Supreme Court delay on investigating Justice Moraes hands ammunition to Flávio Bolsonaro as voters head to polls on Oct 25

By LineZotpaper

Published21 October 2026

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The collapse of Banco Master, a midsize lender with ties to judges, politicians and both campaigns, has become a campaign topic ahead of Brazil's presidential runoff between Sen. Flávio Bolsonaro and President Luiz Inácio Lula da Silva on Oct 25, though its effect on the race is unclear. The Supreme Court's decision to delay until December any ruling on whether to investigate Justice Alexandre de Moraes, who oversaw the prosecution of former President Jair Bolsonaro, has given Flávio a rallying cry while leaving Lula to defend an institution he has no plan to reform.

Brazilians voted in the first round of the presidential election on Oct 4, sending Senator Flávio Bolsonaro, the eldest son of former President Jair Bolsonaro, and President Lula to a runoff. Right-wing parties also triumphed in congressional elections that day and are expected to hold at least 45 of 81 seats in the Senate, which confirms and can remove Supreme Court justices.

The scandal surrounding Banco Master, which collapsed in November 2025 after the Central Bank blocked a sale to the state-controlled Banco de Brasília (BRB), has drawn in figures across the political spectrum. The lender held only 0.57 percent of Brazil's banking assets but attracted depositors by selling certificates of deposit paying up to 140 percent of the interbank benchmark rate, relying on the Credit Guarantee Fund to cover investors. The fund repaid roughly $7.5 billion to about 800,000 savers. BRB, however, lost about $1.4 billion after buying Master's credit portfolios before completing required risk assessments, according to Federal Police findings, with losses falling on the public.

The case has reached the Supreme Court because it involves members of Congress, who can only be investigated with the court's authorization. On Sept 15, Chief Justice Edson Fachin convened a televised session to decide whether Justice Moraes should be investigated for allegedly assisting Master's controlling shareholder, Daniel Vorcaro, and whether that conduct was connected to a legal services contract between Master and the law firm where Moraes's wife is a partner. The court split on a procedural motion, with Moraes voting on his own case, before Justice Flávio Dino asked for up to 90 days to study the file, pushing any decision until mid-December, well after the runoff.

Moraes denies wrongdoing and has not been charged. He is reviled by the far right for overseeing Jair Bolsonaro's prosecution. Flávio has campaigned on the perceived link between the justice and Lula, saying, "Anyone voting for Lula is voting for Alexandre de Moraes." Lula has responded by demanding an investigation of everyone implicated in the Master scandal "no matter who it hurts."

The scandal has touched both campaigns directly. In May, Intercept Brasil published audio of Flávio asking Vorcaro for money to finance "Dark Horse," a biopic about his father. Flávio first denied any connection to Vorcaro, then acknowledged seeking the sponsorship as a legitimate private investment. Records from Brazil's financial intelligence unit trace about $12.3 million from a Vorcaro-linked company to a Texas fund that managed the film's money. In July, Justice André Mendonça authorized a formal investigation into possible corruption, money laundering and currency evasion connected to the financing. Neither brother has been charged.

Lula is not implicated in wrongdoing, according to tax records reviewed by Reuters, though he met with Vorcaro in December 2024. In June, police executed search warrants targeting Senator Jaques Wagner, then the Senate leader, on suspicion he had advanced Master's interests in exchange for benefits for relatives. Wagner, a member of Lula's Workers' Party, denies wrongdoing and has resigned from his leadership post.

The Master scandal has also drawn in other figures. Senator Ciro Nogueira, Jair Bolsonaro's former chief of staff, introduced a draft amendment in 2024 that police say Master's staff wrote to quadruple the Credit Guarantee Fund's per-depositor coverage. Police have said Nogueira received monthly payments of up to roughly $98,000 from Vorcaro and associated figures. Nogueira denies wrongdoing.

Analysis

Why This Matters

The Oct 25 runoff will determine Brazil's direction, with the Master scandal reshaping voter perceptions of both candidates and the judiciary.
The new right-wing Senate majority could use its confirmation powers to reshape the Supreme Court, whose expanding judicial reach has made it a central arbiter of Brazilian democracy.
The delayed Moraes investigation leaves the court's legitimacy in question and hands Flávio a campaign issue that could sway undecided voters.

Background

Brazil's Supreme Court has become a central political player in recent years, with Justice Alexandre de Moraes leading the prosecution of former President Jair Bolsonaro. The Banco Master scandal, much like the Operation Car Wash investigation of the mid-2010s, has ensnared members of Brazil's political and business elite across the spectrum. The lender's unusual business model relied on high-yield certificates of deposit backed by the Credit Guarantee Fund, allowing it to raise money with little scrutiny of its assets. When the Central Bank blocked a sale to state-controlled BRB and shut Master down, the fund repaid savers but BRB's losses fell on taxpayers.

Key Perspectives

Flávio Bolsonaro and right-wing allies: They are using the Moraes controversy to attack Lula, framing a vote for the president as a vote to protect a justice they view as politicised. The delayed investigation gives them a rallying cry against the court. Lula da Silva and the Workers' Party: Lula calls for investigating all implicated but is defending the court as an institution. He is not personally implicated in the scandal but is linked through allies such as Senator Wagner. The Supreme Court: By delaying the Moraes decision until after the runoff, the court avoided a politically explosive ruling before the election but left itself open to accusations of institutional bias.

What to Watch

The Oct 25 runoff result and whether the Master scandal shifts enough votes to determine the outcome.
The new Senate's approach to Supreme Court nominations and possible impeachment proceedings against justices.
The Moraes investigation after Justice Dino's 90-day study period expires in mid-December.

Sources

The Banking Scandal Upending Brazil’s Election · Foreign Policy

Checked

12 claims in this story checked against 1 source: 10 supported.

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Partly supportedThe Banco Master scandal has become a central issue in Brazil’s presidential runoff.Foreign Policy: “The scandal has become a hot topic on the campaign trail, and one likely to benefit Flávio.”
SupportedThe Supreme Court’s delay in deciding whether to investigate Moraes gives Flávio a rallying cry ahead of the Oct. 25 runoff.Foreign Policy: “By putting off a decision on whether to investigate Moraes, the Supreme Court has handed Flávio a rallying cry”
SupportedFlávio said, “Anyone voting for Lula is voting for Alexandre de Moraes.”Foreign Policy: “Flávio has campaigned on the perceived link, saying , “Anyone voting for Lula is voting for Alexandre de Moraes.””
SupportedLula demanded an investigation of everyone implicated in the scandal “no matter who it hurts.”Foreign Policy: “Lula has responded by demanding an investigation of everyone implicated in the Master scandal, “no matter who it hurts.””
SupportedThe runoff is between Flávio Bolsonaro and Lula, following the Oct. 4 first round.Foreign Policy: “Brazilians voted in the first round of the country’s presidential election on Oct. 4, sending Sen. Flávio Bolsonaro—the eldest son of former President Jair Bolsonaro—and President Luiz Inácio Lula da Silva to a runoff.”
SupportedRight-wing parties are expected to hold at least 45 of the Senate’s 81 seats.Foreign Policy: “In congressional elections, right-wing parties triumphed and are expected to hold at least 45 of 81 seats in the Senate.”
SupportedBanco Master collapsed in November 2025 after the Central Bank blocked its sale to BRB.Foreign Policy: “The Central Bank blocked the deal that September and shut Master down on Nov. 18.”
SupportedThe Credit Guarantee Fund repaid about $7.5 billion to roughly 800,000 savers.Foreign Policy: “The Credit Guarantee Fund repaid roughly $7.5 billion to about 800,000 savers”
Partly supportedBRB lost about $1.4 billion on Master’s credit portfolios.Foreign Policy: “Federal Police found that BRB paid about $1.4 billion for Master portfolios before finishing at least one of its required risk assessments.”
SupportedThe court split on a procedural motion, and Dino’s request for up to 90 days pushed a decision to mid-December, after the runoff.Foreign Policy: “They split on a procedural motion, with Moraes voting on his own case, before Justice Flávio Dino asked for up to 90 days to study the file. That clock runs until mid-December—well after the runoff.”
SupportedMoraes denies wrongdoing and has not been charged.Foreign Policy: “Moraes denies wrongdoing. He has not been charged with a crime.”
SupportedThe scandal’s effect on the presidential race is unclear.Foreign Policy: “But it’s unclear whether the scandal has truly impacted the presidential race.”

Correction

21 October 2026An earlier version of this story said the Banco Master collapse had upended Brazil's presidential runoff. The scandal is a campaign topic, but its effect on the race is unclear.