Complicated Financial Scandals: LarrainVial and Capital…

The article discusses the financial scandal in Chile involving LarrainVial Activos AGF and its fund, Capital Estructurado I, amidst allegations of disloyal management and regulatory charges. Key figures from both LarrainVial and STF Capital are implicated in ongoing investigations. Additionally, the fund’s value has drastically dropped, prompting lawsuits from investors while connections to broader corruption schemes further complicate the situation.

This month marks the anniversary of a significant financial scandal in Chile involving false invoices and a major corruption case dubbed the “Audio Case,” linked to lawyer Luis Hermosilla. One of the prominent financial entities affected is LarrainVial Activos AGF, which became embroiled in controversy due to its fund, Capital Estructurado I, launched in late 2022, resulting in charges from the local financial regulatory body and a lawsuit alleging disloyal management.

Currently, the Investigation Unit of Chile’s Financial Market Commission (CMF) is conducting a sanctioning process against LarrainVial Activos AGF and its executives, including Andrea Larraín and Claudio Yañez. Charges have also been filed against STF Capital Corredores de Bolsa, which was previously fined by the CMF, alongside its CEO, Luis Flores, and other executives. The specifics of the charges are confidential, but they pertain to the management and structure of the fund.

The Capital Estructurado I fund was launched to address debts incurred by Antonio Jalaff, with the fund engaging in investment activities aimed at acquiring a stake in the well-known real estate holding company, Grupo Patio. Specifically, the fund aimed to convert Jalaff’s debts, approximately 25 billion pesos (around $26 million), into a 3.87% indirect ownership in the group.

This fund provided two distinct series of shares: Series A for creditors of San Antonio, allowing them to exchange debts for potential equity in Grupo Patio, and Series B for other investors facilitated by STF Capital. Allegations emerged that the management failed to act in the best interests of its clients, drawing criticism.

A lawsuit has ensued from 23 investors accusing LarrainVial Activos AGF of disloyal management, suggesting the firm was aware of Jalaff’s financial instability at the time of marketing the fund. Meanwhile, the Risk Rating Commission acknowledged ongoing investigations by the CMF, permitting pension funds to invest in other LarrainVial funds while this matter is under review.

The value of Capital Estructurado I has seen a dramatic decline, dropping from 27,577.5 pesos ($28.3) to 4,538.8 pesos ($4.7), marking an 83% decrease over one year. LarrainVial Activos AGF stated its confidence in the compliance of its fund management practices and emphasized its commitment to transparency and investor protection.

On the other hand, STF Capital faces a challenging landscape, having its operations suspended by the CMF due to violations of financial reporting requirements. The CMF has issued substantial fines against STF Capital, including its CEO, Luis Flores, who has been critical of the penalties and claims they are excessively punitive compared to those faced by other parties.

The ongoing legal issues are further complicated by connections to a larger corruption network involving the factoring company Factop, which is under investigation for fraudulent activities. The connections between LarrainVial, STF Capital, and the Jalaff brothers continue to evolve as multiple legal and regulatory inquiries progress.

In conclusion, the case surrounding Capital Estructurado I and its ties to significant financial malpractice reflects ongoing turmoil within Chile’s financial sector. Key figures and firms are embroiled in a web of regulatory scrutiny, legal actions, and financial decline. The situation underscores the complexities of investment management and emphasizes the need for compliance and transparency in financial dealings.

Original Source: www.fundssociety.com