The Turkish stock market recently experienced a sharp collapse triggered by a scandal involving market manipulation, affecting roughly 455,000 investors. In mid-September, the BIST 100 index fell by 6% in one day and declined about 12% over several trading days.
The crisis began when several investment fund providers, including firms Pusula Portfoy and Tera, failed to make repayments on time. Tera’s two funds alone managed assets worth approximately €6.5 billion ($6.37 billion). In response, the Capital Markets Board (SPK) intervened and shut down funds managed by seven asset managers, with 131 funds slated for liquidation.
Investigation and Legal Actions
The Istanbul Public Prosecutor’s Office is investigating charges of fraud, capital markets law violations, and criminal organization formation, as announced by Justice Minister Akin Gurlek. So far, over 45 individuals—including executives from investment firms—have been arrested, while assets of 42 individuals and 46 legal entities have been frozen. Additionally, the Istanbul Stock Exchange removed 27 stocks from the BIST 100 index effective October 1.
Investor Impact and Fund Liquidation
The affected funds are undergoing liquidation, meaning their assets will be sold and proceeds distributed proportionally to investors. The liquidation deadline was extended from three to six months to temper selling pressure and avoid fire-sale prices, though individual fund settlements may occur sooner depending on market conditions. However, there are no guarantees that investors will recover their full investments, especially those invested in funds holding “junk stocks” that are hard to trade.
Analysts caution that investors must separate losses caused by normal market risks from damages resulting from alleged fraud and manipulation. Financial advisor Aysel Gundogdu highlighted management and oversight failures, suggesting that the crisis extends beyond liquidity issues. She does not rule out the possibility of tapping into the founders’ and managers’ assets to cover shortfalls. Economist Guldem Atabay emphasized the need for accountability beyond liquidation, calling for identification and recovery of damages from responsible parties.
Political Repercussions
The scandal has had political consequences, including the resignation of Fatma Betul Sayan Kaya, a high-ranking female politician from the ruling Justice and Development Party (AKP). Kaya stepped down amid allegations surrounding stock transactions involving her and her spouse, stating that political responsibility surpasses legal accountability and her resignation should not obstruct investigations.
Opposition parties are pushing for a parliamentary inquiry. Deputy leader Selcuk Ozdag of the Yeni Yol parliamentary group announced plans to submit a motion for investigation once Parliament reconvenes to explore any political involvement in the scandal.
