Brazil’s Eike Batista accused of market manipulation

The problems of Eike Batista, once Brazil’s richest man, were compounded at the weekend when prosecutors accused him of market manipulation and sought to freeze properties worth millions of dollars that he had transferred to his family.

The accusations were made as part of a criminal action against the former oil and gas tycoon, whose empire imploded last year in Latin America’s largest bankruptcy, with prosecutors attempting to seize R$1.5bn ($641m) in assets.

Once the symbol of an emergent Brazil, Mr Batista rode market exuberance over the commodities supercycle to construct an empire of start-up oil, energy and infrastructure companies.

“The fraudulent manoeuvre was made by the accused with the intent of protecting his goods from seizure,” the prosecutors’ office said of the transfers of the properties.

They include a R$10m mansion in the elite Rio de Janeiro neighbourhood of Jardim Botânico, which prosecutors say he transferred to his oldest son Thor; a property in the coastal city of Angra dos Reis, also worth R$10m, which he transferred to Thor and second son, Olin; and a R$5m flat in the Rio beachside neighbourhood of Ipanema, transferred to his wife, Flávia Sampaio.

Mr Batista’s empire collapsed when his flagship oil company, OGX, revealed last year that its two producing projects off the coast of southeast Brazil were flops and filed for bankruptcy, along with his oil services company, OSX.

He has since been accused by the market regulator, CVM, of insider trading.

In a note published over the weekend, Rio de Janeiro state public prosecutors accused him of causing losses to investors totalling R$1.5bn through the manipulation of the market using inside information.

“For the offences committed, he could be sentenced to 13 years in prison,” the prosecutors’ office said.

Mr Batista could not be reached for comment at the weekend. But his lawyer, Sérgio Bermudes, was quoted in business daily Valor Econômico as saying the request to freeze his assets was unreasonable.

He said the tycoon did not use illicit funds to buy the goods and donated the properties to his family openly through normal legal channels.

“He is not fleeing the country,” the newspaper quoted Mr Bermudes as saying.

Prosecutors accused Mr Batista of deceiving the market by announcing a put option to invest US$1bn in OGX two years ago if the shares fell to a certain level. The tycoon did not fulfil the promise.

They also accused him of using insider information to generate profits totalling R$236m in transactions last year.