I donīt know very much about the Jews in colonial Brazil. Acording to wiki you are right , they were Sephardic Jews, conversos, yes, or cristãos novos (New Christians). The inquisition could only pursue baptised people so they focused on the descendants sometimes of many generations. Like the witch hunters they had to have their victims. The judgment had to be in Portugal so they sent the visitadores, a kind of agents to Brazil to investigate the heretics. When found guilty (and the interrogated were tortured) they were sent to Portugal for judgment and execution.
Here is a bit more about the Jews in Brazil. The article is probably translated from Portuguese.
http://www.jewishgen.org/InfoFiles/BrazilianJewry.htm
These are ugly chapters of history.