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On June 12, a $30M check to Nahas's brokers bounced. His brokers were so leveraged, this bounce cascaded from broker to broker and caused Brazilian stocks to drop -15% in one day. It was the biggest crash in Brazil's history. Nahas's brokers sufferred $500M in total losses.
The next day, the Rio stock exchange was forced to suspend trading as it recovered from Naji's bounced check. By the end of the market meltdown, the exchange's president was forced to step down due to improper internal controls and overleverage.pic.twitter.com/TTy66ewdai
Of the brokerages who did business with Nahas, six went bankrupt and had to close their doors. One of these brokerages was owned by Elmo Camoes Filho, who's father (also named Elmo Camoes) was Brazil's top central banker. Camoes was forced to step down as a result of the crash.pic.twitter.com/1uJQKvUrNW
This would be like if a rich trader in the US bought stocks with so much leverage that their blow-up meant the downfall of the NYSE, Robinhood, AND Jerome Powell. That kind of meltdown is unheard of.
Nahas, being the rich and politically connected man he was, only got one year of house arrest for his market manipulation. He remained one of Brazil's richest - and most corrupt - businessmen for many years after the scandal.pic.twitter.com/kwuhU0tf2C
I'll be writing more about Naji Nahas, Brazil'scrash, and its impact on Brazil's stock exchanges in my next Friday post. Sign up here so you don't miss it:https://frontmonth.substack.com/
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