Turkish authorities have detained several top finance executives and issued travel bans amidst a probe into large fund outflows and alleged market manipulation. Muhammed Yariz, Chairman of Pusula Portfoy Yonetimi AS, was arrested, while Tera Holding's Chairman Emre Tezmen received a travel ban. Other detainees include Hedef Holding's Chairman Namik Kemal Gokalp and Altunc Kumova, majority owner of Destek Holding, along with Tera Portfoy's Deputy CEO Ibrahim Bekci. These actions followed a criminal complaint by the Capital Markets Board (SPK) concerning alleged manipulative transactions within specific investment funds and shares.
The investigation has led to the liquidation of 131 investment funds, collectively holding over $18 billion in investments and serving around 350,000 investors. Turkiye Is Bankasi AS and state-run Ziraat Bankasi AS have been appointed to oversee this liquidation process. The SPK indicated that Tera and Pusula, along with five other managers, oversee more than 100 of these funds, with Tera and Pusula accounting for over 70% of the total. Trading bans were also imposed on managers at Tera and Pusula due to alleged manipulation involving Katilimevim, Gundogdu Gida, and Destek Finans Faktoring AS.
The turmoil began with a wave of investor withdrawals from Turkish asset managers, triggered in part by tighter rules in August on stock funds with concentrated positions. This led to a situation where funds run by Tera and Pusula struggled to meet client redemptions. Tera, founded by Emre Tezmen, managed approximately 730 billion liras (around $15 billion) and its flagship fund had reported a gain of over 66,000% over three years, allegedly by investing heavily in related firms and leveraging borrowed money. Tezmen has publicly denied wrongdoing, attributing the issues to a "temporary liquidity issue" and a "highly planned, intentional, and organized speculative attack."
In response to the market volatility, Turkish regulators implemented emergency measures, including criminal complaints, trading bans, and steps to unwind nearly $20 billion worth of funds. The central bank also introduced liquidity support measures, such as boosting funding through one-week repo auctions and adjusting banks' borrowing limits. The banking watchdog allowed banks to exclude buyback shares from core capital requirement calculations until the end of the year. Following these interventions, the Borsa Istanbul 100 index recovered, closing up 3% after a three-day slump, although many smaller stocks continued to decline, highlighting ongoing stress in the market.
Analysts note that while policymakers reacted swiftly to contain the fallout and inject liquidity, the incident exposes the risks within Turkey's rapidly growing fund sector, particularly those involved in concentrated bets on thinly traded stocks. The outcomes of the liquidations, the bans, and the return of investor confidence beyond blue-chip stocks will be crucial in determining the longer-term impact on the market.
