Exclusive: Epstein Files Reveal Profit at Peak of Brazil’s Impeachment Crisis

By André Vieira

Brazil Stock Guide – Financial records contained in the personal files of Jeffrey Epstein show that he realized a substantial financial gain in January 2016 by closing a position tied to the sharp deterioration of Brazil’s sovereign credit risk, at the height of the political crisis that would culminate in the impeachment of then president Dilma Rousseff.

The files show that the billionaire financier — found dead in his U.S. jail cell in August 2019 and later exposed as the central figure in a global scandal involving allegations of sexual abuse, financial misconduct and ties to public officials and fellow billionaires — made money at the peak of Brazil’s impeachment crisis, crystallizing gains when international confidence in the country hit its lowest point.

Brazilian crisis

Internal email correspondence dated January 15, 2016, marked Confidential, shows instructions to “unwind at 462 bp,” referring to the level of Brazil’s five-year sovereign credit default swap. Follow-up messages confirm the order would be left with the trader at that level, “good for the day,” placing the exit virtually at the peak of Brazil’s sovereign risk cycle.

The emails detail market color at the time of execution. The bank quoted a bid of 452 basis points and an offer of 467 basis points for Brazil CDS protection, implying an unwind payment of $1,278,512. The correspondence also recalls that approximately $491,941 had been paid to enter the trade. The figures translate into a net profit of $786,571, equivalent to an estimated 160% return on the capital initially deployed. At today’s exchange rate of roughly R$5.22 per dollar, that gain would be worth about R$4.1 million.

The transaction was intermediated by Deutsche Bank. The emails indicate the unwind was suggested by the bank and executed following guidance from Vahe Stepanian, who at the time served as a Vice President covering U.S. single-family offices, providing clients access to the firm’s global platform across products, including derivatives and the institution’s balance sheet. Messages exchanged that morning confirm the execution mechanics and timing.

The records do not specify when the position was originally established. However, the magnitude of the gain suggests it was put on months earlier, when Brazil’s CDS traded at significantly lower levels through 2015, before the country lost its investment-grade rating and political instability intensified.

In early 2016, Brazil was confronting a rare convergence of shocks: a deep recession, rapidly deteriorating public finances, sovereign rating downgrades and an escalating political crisis in Congress that advanced toward Rousseff’s removal. Those forces drove a sharp repricing of sovereign risk and boosted the value of credit-protection instruments linked to the country. The impeachment vote would only come later, in April 2016, after the peak stress captured in the CDS.

There is no indication in the emails of political coordination, interaction with public officials or the use of privileged information. The profit reflects standard market dynamics, whereby rising perceptions of sovereign risk increase the value of CDS protection. Even so, the timing is notable. January 2016 marked the peak of Brazil’s sovereign stress, a level not revisited in subsequent episodes, including the 2018 truckers’ strike or the global market shock during the Covid-19 pandemic.

Brazil Stock Guide contacted Vahe Stepanian for comment regarding the transaction and the emails cited in this report, but did not receive a response.