Federal Prosecutors Launch Investigation into XP Investimentos Amid Allegations of Financial Irregularities
In a significant development, Brazil's Federal Public Ministry (MPF) has initiated an investigation into XP Investimentos following accusations of financial misconduct. The probe focuses on alleged "Collar UI" practices targeting novice investors, as well as broader concerns about the firm's business model. This marks the latest in a series of controversies surrounding one of Brazil's largest investment platforms, which has previously faced allegations of operating a Ponzi-like scheme. Below, we break down the key allegations, the company's response, and what this means for investors.
What Are the Allegations Against XP Investimentos?
The MPF's investigation stems from a complaint filed by a consumer, with a primary focus on the so-called "Collar UI" strategy. According to financial experts, this practice often targets inexperienced, conservative investors by offering them a FORM of capital protection that may not be as beneficial as advertised. The investigation is still in its early stages, but it has already drawn attention to XP's broader business practices.
Carlos Henrique, Chief Compliance & Legal Officer at Frente Corretora, explains that the allegations vary in severity. "The Ponzi scheme accusation WOULD implicate the institution as a whole, whereas the Collar UI issue is more about individual advisors' conduct," he notes. The Ponzi scheme allegation, detailed in a report by Grizzly Research, suggests that XP may be using funds from newer investors to pay returns to earlier ones—a classic hallmark of financial fraud.
For instance, if Investor A earns a 20% return on a R$100 million investment, the report claims XP might pay that return using funds from Investor B, rather than from legitimate profits. XP has denied these allegations, calling them "baseless" and threatening legal action against Grizzly Research.
Is XP's Business Model Sustainable or a Red Flag?
XP's financial performance has raised eyebrows, with the company reporting a R$1.2 billion net profit in Q1 2025—a 20% year-over-year increase. Its earnings per share (EPS) also grew by 24% over 12 months, far outpacing traditional banks like Santander and Bradesco, which posted negative returns in the same period.
Henrique argues that XP's success stems from savvy tax planning rather than fraud. "If XP manages assets and profits outside Brazil, it can legally reduce its tax burden, which boosts results. This isn't illegal—it's just smart business," he says. However, critics contend that the line between tax optimization and financial manipulation is thin, especially when combined with aggressive sales tactics.
Are XP's Advisors the Real Problem?
With over 3,000 accredited advisors operating in 600 offices nationwide, XP relies heavily on third-party agents to sell its products. This decentralized structure, while scalable, may contribute to the alleged misconduct. "Advisors might push high-commission products like Structured Operation Certificates (COEs) onto unsuspecting clients," Henrique admits. "For example, a lottery winner seeking advice might end up with a portfolio skewed toward the advisor's interests rather than their own."
The Collar UI product, central to the MPF's investigation, allegedly works like this: If an investment exceeds a predetermined profit threshold, the excess goes to the advisor rather than the investor. "The way it's sold can be misleading. Clients might think they're fully protected from losses, but they're also giving up significant upside," Henrique explains.
How Is XP Responding to the Controversy?
XP has remained largely silent, declining to comment for this article. However, it previously told G1 it would pursue legal action against Grizzly Research and recently sued to remove Daniel Penin's critical documentary from YouTube. Henrique suggests this approach may backfire: "Censorship looks like an admission of guilt. A better strategy would be to produce their own transparent content explaining how their products work."
In a statement to Valor Econômico, XP reiterated its commitment to compliance and transparency. The MPF has not yet indicated when its investigation might conclude.
Key Questions and Answers About the XP Investimentos Investigation
What is the Collar UI practice under investigation?
The Collar UI is a financial product marketed to conservative investors, promising capital protection but potentially diverting excess profits to advisors.
Has XP been accused of running a Ponzi scheme?
Yes, a Grizzly Research report alleges XP uses new investor funds to pay returns to earlier investors, though XP denies this.
Why is XP more profitable than traditional banks?
XP attributes its performance to international tax planning, while critics suspect unethical profit-shifting.
What are COEs, and why are they controversial?
Structured Operation Certificates combine investments and insurance, often generating high commissions for advisors—sometimes at clients' expense.
How can investors protect themselves?
Experts recommend scrutinizing fee structures, avoiding complex products without full understanding, and diversifying across multiple institutions.
