Between the mid-1990s and 2002, several thousand foreign residents in Costa Rica put money into an operation known simply as “The Brothers”. When it collapsed, most of them never saw it again.
It remains the largest financial scandal in modern Costa Rican history, and the single most useful cautionary tale for anyone moving money here. It is worth knowing accurately rather than as folklore.
What the operation was
Enrique Villalobos Camacho and his brother Osvaldo Villalobos Camacho ran a licensed currency exchange in San José — the Casa de Cambio Hermanos Villalobos, later Ofinter S.A. — regulated by Costa Rica’s financial supervisor SUGEF.
Alongside that legitimate business ran something else. An informal deposit-taking operation, known to its participants as The Brothers, which took money from individuals and paid a fixed monthly return. The brothers characterised the money as personal loans from friends rather than deposits — a framing that mattered legally, because it was the argument for why banking rules did not apply.
You could not simply walk in. Access was by referral only, through existing participants — which is precisely what made it feel exclusive, and which is also how it grew.
The terms, and why they should have been the warning
- The minimum was US$10,000.
- The return was 3% per month — reported as 36% a year, or up to 42% compounded.
- By the end there were more than 6,200 participants, most of them foreign residents.
- Estimates of the money taken in over the life of the scheme range from around US$405 million, the figure in the findings of a later international tribunal, to well over US$800 million in contemporaneous press estimates.
Consider what a guaranteed 36% a year actually implies: an investment strategy that reliably beats every professional fund manager on earth, sustained for years, offered privately to retirees in San José. The tribunal that later examined the operation described it as a fraudulent Ponzi scheme, and noted that many had invested with what it called relatively little investigation.
July 2002
The trigger was a money-laundering investigation, connected to a request originating abroad and to a small number of Canadian participants alleged to be involved in drug trafficking. In early July 2002 Costa Rican authorities raided the offices and froze the bank accounts.
The operation was initially closed, then relocated and carried on taking money — a detail worth pausing on, because some people put funds in after the raid.
Within months the whole thing collapsed. Enrique Villalobos left the country, reportedly travelling on a false passport.
What happened legally — and it is different for each brother
This is where most retellings go wrong, so it is worth being exact.
Osvaldo Villalobos was tried and convicted. On 16 May 2007 the court found him guilty of fraud and illegal financial intermediation and sentenced him to 18 years.
He was acquitted of money laundering — prosecutors could not prove he knowingly received drug money. That distinction is routinely lost in the retelling, and it matters.
The court found the scheme had been structured to take investors’ money without returning it, and heard that Enrique had told participants he owned a personal loan company when no such registered company existed.
The conviction was upheld on appeal in June 2008. Accounts of the final term differ — the Poder Judicial’s own published summary records the sentence being increased to 19 years, while contemporaneous reporting described time already served being deducted, leaving roughly 17 years and 4 months. Either way, the conviction stood.
He has since served his sentence and been released, and has stated publicly that he completed it in 2016 with his rights as a citizen restored. In January 2025 he sought to register as a presidential pre-candidate for a Costa Rican political party, drawing objections from within it, though nobody disputed his legal right to try.
Enrique Villalobos was never tried, and has never been convicted of anything. He fled and remained a fugitive. The reason he was not convicted is specific and worth knowing: Costa Rican law does not permit a person to be tried in absentia. It was not a failure of evidence or of will — the case simply could not proceed without him.
His whereabouts, and whether he is still alive, are not a matter of public record we can verify.
What the depositors got back
Very little, and the arithmetic is bleak.
At the 2007 trial the judge awarded damages to the investors who had brought civil claims — something over a hundred of them — with frozen accounts holding an estimated US$12 million earmarked toward restitution, against a trial-court order of roughly US$20 million.
On appeal the following year, the Sala Tercera reduced the confirmed civil awards to a little over US$500,000, referring the remaining claims to the civil courts.
And of more than 6,200 participants, only around 300 ever filed a civil claim within the criminal case at all. Most simply lost everything.
A group of investors then tried a different route, bringing an international arbitration against the Republic of Costa Rica itself on the argument that the State had failed to supervise. The tribunal declined jurisdiction in 2010 and they recovered nothing.
Set that against hundreds of millions of dollars taken in. In practice, recovery was negligible.
Why this still matters
Not because Costa Rica is unusually dangerous for money — the same scheme, under other names, has run in every country. It matters because of the specific conditions that made it work here, and those conditions have not gone anywhere.
A community that trusts referrals. The foreign-resident population is close-knit and word of mouth carries enormous weight. “I have been paid on time for eleven years” is a persuasive sentence and a worthless one — in a Ponzi scheme, early participants are paid, out of the money of later ones.
A regulatory gap that felt like a technicality. The currency exchange was licensed and supervised. The lending arrangement beside it was presented as private loans between friends, and was not authorised banking. That distinction was invisible from the outside, and it was the whole difference.
People arriving with a lump sum and no local knowledge. Someone who has just sold a house abroad, does not speak Spanish, does not know which institutions are supervised, and would like the money to produce an income — that was the profile then, and it is the profile of many people arriving today.
The questions that would have saved them
- Is the entity taking my money supervised, and by whom? A licence for one activity is not a licence for another.
- What produces the return? If the answer is vague, proprietary, or explained as a family secret, that is the answer.
- Is the rate plausible? A guaranteed monthly return well above what banks and funds achieve is not an opportunity you found. It is a warning.
- Who recommended it, and what do they actually know? A neighbour being paid on time is evidence of nothing at all.
- What happens if it stops? Ask who you would sue, in which court, and against what assets. In this case the answer turned out to be: nobody, nowhere, and none.
A note on how this is usually told
The story has been retold so often in expat circles that it has drifted — sentences merge, both brothers get convicted, sums inflate. The account above sticks to what was established: the tribunal’s findings on scale and structure, the Costa Rican courts’ judgments on Osvaldo, and the fact that Luis Enrique was never tried.
It is a better warning told accurately than told dramatically.
Moving to Costa Rica — and moving money with you?
Getting residency right is a separate matter from getting your finances right, but they arrive at the same time, and both reward doing things in the correct order.
CRIE — Costa Rica Immigration Experts handles residency applications, renewals, permanent residency and citizenship. We are not financial advisers, and this page is not investment advice — but we have watched enough arrivals get this wrong to think the history is worth knowing.
See the types of residency in Costa Rica, or get in touch.
Sources: the findings of fact in the ICSID arbitral award in Anderson and others v. Republic of Costa Rica (2010); the Poder Judicial’s published record of the Sala Tercera ruling of June 2008; and contemporaneous Costa Rican reporting of the 2007 trial and the 2008 appeal in The Tico Times and A.M. Costa Rica. Where the tribunal and the press differ on the sums involved, both are given. General information only, not legal or financial advice.
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