Brazil’s government closed Banco Master after a federal police investigation uncovered large-scale fraud, the Central Bank said.

Central Bank executive Fabio Carlos Ferreira stated that all assets held by the bank and by its current and former managers had been frozen, and that a government-appointed administrator had taken control, AP reported.

Banco Master, which had shown liquidity stress for several months, had up to $16bn in assets.

Clients and creditors will seek compensation through a private guarantee mechanism funded by other financial institutions, a procedure used in previous bank interventions.

Earlier in the day, federal police director-general Andrei Rodrigues told lawmakers the force had identified a fraud scheme worth BRL12bn ($2.25) within the financial system, without confirming whether it involved Banco Master or state-owned BRB, which had attempted to purchase the bank earlier this year.

Federal police said Tuesday’s operation targeted financial entities suspected of fraudulent or reckless management and links to a criminal organisation.

Six people were arrested, and officers froze billions of reais and seized high-value items including vehicles, artworks and watches. Investigators said the case involved one institution issuing high-yield bonds and another acquiring them despite liquidity concerns.

Local media reported that senior executives, including a major shareholder, were detained. A planned acquisition of Banco Master by investment group Fictor was cancelled shortly before the shutdown.

Finance Minister Fernando Haddad backed the Central Bank, saying: “The Central Bank is the regulatory authority of the financial system, and I’m certain that, to have reached this point, the process must have been very robust.”