#USA #San Francisco #Ponzi scheme #Madoff #XP Inc.

XP Inc. Under Investigation Following Allegations

In a significant development on March 12, 2025, XP Inc. (NASDAQ: XP), a leading player in Brazil's financial technology sector, saw its share value plummet by over 5%. This steep decline came in the wake of a damning report from short-seller Grizzly Research, which accused the company of running a massive Ponzi scheme similar to that orchestrated by the infamous Bernie Madoff. The firm, known for providing low-fee financial products and services, faces serious allegations questioning the integrity of its operational model and financial reporting.

Allegations and Investigations

The investor rights firm Hagens Berman has launched an investigation into these allegations and is urging individuals who have suffered significant losses due to XP's stock decline to step forward. The crux of Grizzly Research's report includes claims that XP's profits rely heavily on what insiders reportedly describe as a “Madoff-like Ponzi scheme.” The research specifically highlights a fund named GLADIUS FIM CP IE, which allegedly posted an astonishing return of over 2,419% over the last five years, despite very low volatility. The report adds that the returns from GLADIUS and its associated fund, COLISEU FIM CP IE, exceed XP’s overall earnings, suggesting that without these funds, XP would not be profitable.

Insiders have reportedly claimed that the scheme's foundation lies in a product called COE, or Certificado de Operações Estruturadas, which XP aggressively markets to retail clients in Brazil. According to former employees, the operation can only sustain itself as long as inflows of these COEs continue. Should these sales decline, XP could face dire financial obligations that it may not be able to fulfill. This precarious situation raises discomforting questions about the firm’s long-term viability.

Shareholder Response

In light of the report, XP's share price witnessed a noticeable drop, amplifying concerns among its investors. Reed Kathrein, a leading partner at Hagens Berman, remarked on the gravity of the situation, stating, “We are investigating whether XP, as Madoff, may have misrepresented its business model to investors.” This inquiry reflects the period of regulatory and investor scrutiny that follows high-profile financial misconduct, highlighting the essential need for transparency and accountability in corporate practices.

XP Inc. has assured investors of its commitment to improving its internal control over financial reporting. However, the recent revelations have challenged the trust investors placed in the company. Those who have faced severe losses and possess knowledge pertinent to the investigation are encouraged to reach out to Hagens Berman.

Whistleblower Incentives

In a related note, individuals with non-public information regarding XP are urged to consider participating in the SEC's Whistleblower program, which allows whistleblowers to earn up to 30% of any successful recovery made by the SEC based on their information. This program incentivizes individuals to come forward with vital information that could assist in safeguarding the interests of investors and uphold corporate ethics.

Conclusion

As the investigation into XP Inc. unfolds, the firm’s future remains uncertain. The allegations echo larger themes within the financial industry, where the potential for misconduct looms, reminding stakeholders of the importance of diligence and the vigilant pursuit of accountability in corporate operations. Investors, analysts, and observers will keenly watch this situation as it develops, hoping for clarity and justice in the face of troubling financial claims.