Almost half a million investors, specifically 455,758 individuals, in Turkey are affected by the liquidation of 131 investment funds run by seven different firms. These funds hold stakes worth approximately $18 billion. The crisis erupted when some funds, including those managed by Tera Portföy and Pusula Portföy, failed to make payments to investors attempting to withdraw their savings, prompting allegations of a "Ponzi-like" scheme.
Turkish authorities have responded by arresting Emre Tezmen, the chairman of Tera Yatirim Holding, along with four other individuals, including Tera board members Kerem Alkin and Emre Alkin, Tera Portföy general manager Alper Öztürk, and Pusula Finans Holding chairman Serdar Turhan. The Capital Markets Board has ordered the liquidation of the affected funds, with İşbank and state-owned Ziraat Bank overseeing the process. The liquidation period has been extended from three to six months to allow for asset sales under the most favorable market conditions possible, though the amount investors will recover remains uncertain.
The investigation has also led to the freezing of assets linked to executives at several financial firms, including Tera Yatirim Menkul Degerler AS, Pusula Finans Holding AS, Hedef Holding, and Bulls Portföy Yönetimi. Prosecutors are also examining money and crypto transfers abroad since 2024 to determine if assets were moved. The crisis has had a broader impact on the Turkish stock market, with the Borsa Istanbul All Shares index falling 12% since the start of last week, and about 50 stocks experiencing declines of 40% or more. Finance Minister Mehmet Şimşek stated that the affected funds represent only 10% of the sector, and he does not expect the crisis to spread across Turkey’s financial markets, stating, "We have placed the problematic area under quarantine."
The unraveling of these funds stemmed from their significant investments in rarely traded shares. This led to increased valuations from modest buying, attracting new investors. Some fund managers also borrowed against their holdings to acquire more shares. However, as withdrawal requests intensified, selling these illiquid assets quickly became problematic, risking a sharp decline in prices. Warning signs emerged in June, when index provider MSCI cautioned about "possible coordinated trading" distorting prices in smaller Turkish listed companies, although Tera or other companies were not specifically named. Tera's own share price had reportedly surged over 50,000% at its peak within four years of its listing. Regulators tightened rules affecting investment funds in August, and MSCI may consider further action regarding Turkish securities in its indices if insufficient progress is made by its November review.
