Following a liquidity crisis in Turkey's fund market, Turkish authorities have detained executives from two major financial firms. Namık Kemal Gökalp, head of Hedef Holding, which owns Info Yatırım, was reportedly taken into custody yesterday, with a raid conducted at Info Yatırım's central office. Today, Altunç Kumova, owner of Destek Yatırım Bankası, was also detained, and his home and workplace were searched. These arrests occurred as 130 investment funds, with an estimated value of approximately 900 billion liras, were ordered to be liquidated, affecting 515,000 investors.
The detentions come after Turkey’s Capital Markets Board (SPK) ordered the liquidation of 130 investment funds and suspended trading in funds managed by seven companies: Tera Portfolio Management, Pusula Portfolio Management, Hedef Portfolio Management, Atlas Portfolio Management, A1 Capital Portfolio Management, Pardus Portfolio Management, and Bulls Portfolio Management. This move was triggered by several funds, including those managed by Tera Portfoy and Pusula Portfoy, failing to meet redemption requests from investors, leading to a steep selloff in the Turkish market. Tera Portfoy alone had two funds with a combined $7.5 billion in assets that defaulted on redemptions.
The crisis began when investors withdrew as much as $1 billion from Turkish funds in a single day. The SPK's intervention followed a period where some local funds, particularly Pusula and Tera, which collectively managed about $27 billion, gained significantly by investing in shares of related companies with limited public float. The SPK introduced rules in late August to reduce concentrated share positions, which accelerated investor withdrawals and contributed to the market downturn, with the Borsa Istanbul's main index dropping nearly 6%.
In response to the turmoil, Turkey's Financial Stability Committee met and described the problem as "temporary and manageable," while the central bank injected 300 billion lira ($6.2 billion) in one-week loans to banks to ease cash shortages. The SPK also initiated separate enforcement actions, referring 38 individuals to prosecutors for suspected share manipulation and imposing trading bans. Despite these measures, investors in the affected funds are still awaiting details on the liquidation process and asset valuation.
The arrests and liquidations highlight significant regulatory concerns over market manipulation and liquidity issues. The SPK's actions are aimed at protecting investors' rights and restoring confidence in the Turkish financial markets, but the unfolding legal and financial consequences for the involved executives and firms remain to be seen.
