This research investigates the illegal Vegetation Suppression Authorization (VSA) for Legal Reserve Compensation (LRC) in Tocantins, Brazil, between 2012 and 2014. The VSA is a license issued by state environmental agencies that authorizes the removal or clearing of native vegetation. This infraction resulted from the state environmental agency’s mistaken interpretation of Resolution 07/2005 of the State Environmental Council and the Native Vegetation Protection Law, which operates nationally and takes precedence over state resolutions and laws. The study area focuses on eight municipalities contained in the Formoso, Pium, and Javaés river basins. The methodology examines irregular VSA-LRC cases through geospatial data analysis, multitemporal analysis using remote sensing data, and economic assessments in both the origin and destination areas of the compensatory reserve. The results showed that among the 217 VSA-LRC applications during the period, 93 had corresponding geospatial data, indicating that 57.1% of the geospatial data were missing. This discrepancy between the authorized area and the available geospatial information restricts the oversight capability of the regulatory agency. A decade-long deforestation analysis of VSA-LRCs using remote sensing data considered three phases: 2012–2014 (application and issuance of VSA-LRCs), 2015–2018 (operational issuance), and 2019–2022 (post-expiration of VSA-LRCs). The results revealed a total VSA-LRC area of 343.291 km² (34,329.10 ha), with 229.1169 km² (22,911.69 ha) of deforestation. Notably, 54.877 km² (5487.70 ha) of this deforestation occurred in 2019–2022, after the VSA-LRC had expired. The analysis of the LRC origin and destination areas demonstrates a unidirectional strategy, from economically more valuable areas to less valuable ones, according to land market dynamics. Therefore, this investigation concludes the need for greater administrative transparency, the development of a reliable geospatial data system for monitoring, and policy changes and actions to enhance environmental protection.