This article discusses the repercussions of a financial scandal in Chile involving LarrainVial Activos AGF and its Capital Estructurado I fund, caught in regulatory scrutiny and allegations of disloyal management. The CMF has brought charges against key executives while ongoing investigations and lawsuits reflect broader issues within the financial market. Fund performance has also declined sharply amid these challenges.
This month marks one year since Chile experienced a significant financial scandal involving STF Capital, a brokerage firm, and the factoring company Factop, as well as the corruption case surrounding lawyer Luis Hermosilla. The fallout from these events continues to reverberate through Santiago’s financial sector.
A notable consequence involves LarrainVial Activos AGF, a management firm focused on alternative assets and part of the broader LarrainVial financial group. This firm has faced scrutiny due to its late 2022 fund launch, Capital Estructurado I, which has led to charges by the local regulator and a lawsuit over alleged management misconduct.
Presently, LarrainVial Activos AGF is undergoing a sanctioning process initiated by the Investigation Unit of the Financial Market Commission (CMF) in Chile. Charges have been directed not only at the firm but also at its directors—Andrea Larraín, Sebastián Cereceda, José Correa, Jaime Olivera, Andrés Bulnes—and managing partner Claudio Yañez.
Additionally, complaints have been filed against STF Capital Corredores de Bolsa, which faced a fine last year from the CMF, along with CEO Luis Flores and other executives. While the specifics of these charges remain confidential, the CMF is investigating the fund’s management, marketing, and valuation practices.
Capital Estructurado I was designed to resolve Antonio Jalaff’s financial debts, facilitating an indirect investment in Grupo Patio, a prominent real estate holding. Launched in late 2022, the fund aimed to raise approximately 25 billion pesos ($26 million) to finance these debts—the exchange yielding a 3.87% indirect stake in Grupo Patio SpA.
The fund’s structure encompassed two series of shares: Series A for San Antonio creditors, allowing them to convert debts into indirect shares, and Series B for non-creditor investors introduced by STF Capital. This arrangement has raised complaints alleging mishandling by the manager and broker at the expense of the investors.
The fund’s management maintained it was established to invest in specific financial instruments including equity and debt of various entities. However, the regulatory scrutiny has led to a lawsuit from 23 investors claiming disloyal management, as they allege awareness of Jalaff’s financial troubles during the fund’s marketing.
The value of fund units has drastically decreased, dropping 83% from November 2023 to September 2024. The firm expressed confidence in its compliance with regulations, assuring transparency and thorough communication with investors regarding the fund’s details and risks while taking measures to protect investments.
STF Capital faces substantial challenges, having its operations suspended in March 2023 due to regulatory violations. Fines totaling approximately $382,610 were imposed, alongside the cancellation of its operational registrations. Allegations claim STF Capital prioritized its interests at the expense of others, with its CEO, Luis Flores, proceeding without legal representation amid financial difficulties.
The Court of Appeals upheld penalties against STF Capital and its leadership in October 2024, levying significant fines against Flores and others. Meanwhile, accusations against Factop highlight its involvement in a network of corruption and fraud with false invoices. Flores claims his interests are independent of Factop’s controlling shareholders, and he is appealing for separation from the allegations.
The unfolding situation is further complicated by other ongoing investigations concerning Factop and the Jalaff brothers, bringing significant attention and scrutiny to multiple legal fronts within Chile’s financial landscape.
In summary, the situation surrounding LarrainVial Activos AGF and its Capital Estructurado I fund reflects broader issues of regulatory compliance and corporate governance in Chile’s financial sector. With ongoing investigations amidst significant financial turmoil and lawsuits, the repercussions of this controversy continue to develop, affecting various stakeholders involved in the financial landscape. As the legal proceedings unfold, the insights into managerial accountability and transparency will be crucial moving forward.
Original Source: www.fundssociety.com
