Turkish authorities are widening a probe into an $18 billion investment fund scandal, which has been likened to a Ponzi scheme and affects more than 350,000 investors. Legal proceedings have been initiated against 60 suspects, with 4 arrested and 44 detained, while efforts continue to apprehend 12 others. Among those detained are high-profile finance executives including Muhammed Yariz, chairman of asset manager Pusula Portfoy, Altunc Kumova, chairman of Destek Holding, and Serdar Turhan, chairman of Pusula Holding. Tera executives, including Chairman Emre Tezmen and board member Alper Ozturk, have also been detained, with Tezmen, Turhan, Ozturk, and Alkin brothers (Emre and Kerem) being referred to court.
The scandal erupted after Pusula and Tera were unable to meet investor withdrawal requests, leading regulators to liquidate 131 associated investment funds. These funds, covering over $18 billion in assets, had reportedly inflated their values by buying large amounts of illiquid shares, causing prices to soar and attracting more investors with promises of high returns. One striking example is Destek Finans Faktoring, whose shares rose over 300% this year, at one point valuing the company at approximately $14.2 billion, close to Turkey's largest oil refiner, TUPRAS ($16.4 billion).
In response to the crisis, Turkey has frozen assets tied to executives from firms including Tera Yatirim Menkul Degerler AS, Pusula Finans Holding AS, Hedef Holding, and Bulls Portföy Yönetimi. Authorities also restricted asset transfers by board members and their relatives. The BIST-100, Istanbul's benchmark stock index, fell over 5% last Wednesday as the crisis intensified, triggering a market-wide circuit breaker, though it rebounded 2.6% the next day after authorities announced support measures. Investors also withdrew about $1 billion from local investment funds in a single day, exacerbating a liquidity crunch.
Warnings about market manipulation had been building for months, with global index provider MSCI expressing concerns in June about coordinated trading inflating stock values. Government regulators introduced broad measures last month to limit market manipulation, but critics argue the intervention came too late. Finance Minister Mehmet Simsek downplayed the turmoil on September 18, stating the affected funds represented a small portion of the market and posed no systemic risk. Borsa Istanbul recently removed more than a quarter of the BIST-100 index companies, including Destek Finans, in its biggest reshuffle in six years.
