Brazil’s biggest-ever crackdown was aimed at dismantling the fuel supply chain controlled by organized crime across eight states
Por Celso Chagas
The Federal Revenue Authority (Receita Federal) and partner agencies launched “Operation Hidden Carbon” this Thursday (Aug. 28) to dismantle a gigantic fuel sector fraud and money laundering scheme.
The action is considered the largest of its kind in Brazil's history and targets organized crime — specifically the Primeiro Comando da Capital (First Capital Command), Brazil's largest and most powerful organized crime syndicate.
Search and seizure warrants were executed against against some 350 individuals and companies in eight states: São Paulo (SP), Espírito Santo (ES), Paraná (PR), Mato Grosso (MG), Mato Grosso do Sul (MS), Goiás (GO), Rio de Janeiro (RJ), and Santa Catarina (SC).
The targets include links in the fuel supply chain controlled by organized crime — from import, production, distribution, and retail sales to the final stages of asset concealment and protection through fintechs and investment funds.
Investigations indicate that the criminal organization not only laundered money from illicit activities but also reaped high profits throughout the fuel production chain. The use of hundreds of operational companies in the fraud scheme disguised the funds. Tax evasion and fuel adulteration further increased profits, harming consumers and society.
Financial transactions were carried out through payment institutions (fintechs) rather than traditional banks, making it harder to trace the money flow. Profits and laundered funds were shielded in investment funds with multiple layers of concealment to prevent identification of the true beneficiaries.
About 350 Federal Revenue Authority agents were involved, along with personnel from the São Paulo State Prosecutor’s Office (MPSP), through the Organized Crime Special Action Group (Gaeco); the Federal Prosecutor’s Office (MPF), also via Gaeco; the Federal Police; State Civil and Military Police; São Paulo’s Department of Finance and Planning (Sefaz/SP); the National Agency of Petroleum, Natural Gas and Biofuels (ANP); and the São Paulo State Attorney General’s Office (PGE/SP).
Importers acted as intermediaries, buying naphtha, hydrocarbons, and diesel abroad with funds from formulators and distributors tied to the criminal organization. Between 2020 and 2024, these actors imported more than R$10 billion (US$1.8 B) in fuel. Formulators, distributors, and affiliated gas stations repeatedly evaded taxes on sales. The Federal Revenue Authority has already assessed more than R$8.67 billion (US$1.6 B) in federal tax liabilities from participants in the scheme.
Another detected fraud involved fuel adulteration. Methanol — supposedly imported for other purposes — was diverted to make adulterated gasoline, seriously harming consumers.
Formulators, distributors, and gas stations were also used to launder illicit money. There are indications that convenience stores, station management companies, and even bakeries participated in the scheme. Tax auditors found irregularities in more than 1,000 gas stations across 10 states: São Paulo (SP), Bahia (BA), Goiás (GO), Paraná (PR), Rio Grande do Sul (RS), Minas Gerais (MG), Maranhão (MA), Piauí (PI), Rio de Janeiro (RJ), and Tocantins (TO).
Most of these stations served to receive cash or card payments and channel criminal funds through their bank accounts as part of the laundering network. Between 2020 and 2024, these stations processed R$ 52 billion (US$ 9.6 B) in financial transactions, with extremely low tax payments inconsistent with their business volume. They have already been fined more than R$ 891 million (US$ 164 M).
Roughly 140 other stations were used differently: despite no business activity between 2020 and 2024, they received more than R$ 2 billion (US$ 269 million) in fuel invoices — likely to disguise the flow of illicit money into distributor accounts linked to the criminal organization.
Funds were funneled into the financial system via fintechs — companies offering digital financial services. The Federal Revenue identified one payment fintech operating as a “parallel bank” for the criminal group, moving more than R$ 46 billion (US$ 8.48 B) from 2020 to 2024. The same people controlled smaller payment institutions used to add another concealment layer.
This fintech also received large cash deposits. Between 2022 and 2023, more than 10,900 deposits totaling over R$ 61 million (US$ 1.12 M) were made — an activity highly irregular for payment institutions, which typically handle only electronic funds.
The criminal organization exploited regulatory gaps for fintechs, preventing regulators and auditors from tracking individual client transactions.
Illicit funds were reinvested in businesses, properties, and other ventures via investment funds receiving fintech transfers — giving the money a veneer of legitimacy.
The feds identified at least 40 investment funds (multi-market and real estate), with R$ 30 billion in assets, controlled by the organization. Most are closed-end funds with a single shareholder — often another fund — creating layers of opacity.
These funds acquired a port terminal, four alcohol plants (plus two more in partnership or under negotiation), 1,600 fuel transport trucks, and over 100 properties — including six farms in São Paulo state worth R$ 31 million (US$ 5.53 M) and a residence in Trancoso, Bahia, bought for R$ 13 million (US$ 2.4 M). Evidence suggests that these funds served as asset shields, with fund administrators aware of and complicit in the scheme.
The Legal Fuel Institute (ICL) expressed support for the ongoing operations: “The ICL congratulates the São Paulo State Prosecutor’s Office (MP-SP), through Gaeco; the Federal Prosecutor’s Office (MPF); the Federal, Civil, and Military Police of São Paulo; and the Federal Revenue Service for their action,” the institute said in a statement.
The group added that beyond laundering illicit funds and threatening public safety, organized crime in the fuel sector undermines tax collection, public policies, fair competition, and the daily lives of millions of drivers. “We’ve been warning about organized crime entering the fuel sector for years, causing huge economic and social harm. We believe this operation can mark a turning point, showing Brazil will not tolerate illegal practices. We also stress the urgent need to pass laws imposing exemplary penalties on persistent tax evaders and anyone exploiting legal loopholes,” said ICL President Emerson Kapaz. ICL further highlighted the importance of cooperation between the public and private sectors to detect and combat irregular activities.
In another joint note, Bioenergia Brasil, ICL, Sindcom, and Unica reaffirmed full support for the authorities leading Operation Hidden Carbon: “Combating illicit practices is essential to protect consumers, ensure tax revenue, strengthen investor confidence, and create a transparent business environment that rewards legitimate, innovative companies. This operation — alongside other measures already taken by the São Paulo government, such as joint liability for gas stations — ensures order and security for law-abiding citizens,” they stated.