Turkish authorities ordered the liquidation of about 130 investment funds worth $17bn earlier in September, after allegations that the funds ran Ponzi-like schemes affecting half a million people. The scandal has exposed links between the funds, their managers and Turkey’s ruling elite, and now poses a major political challenge for President Recep Tayyip Erdogan’s administration.
Fund losses and political ties
The funds concentrated their holdings in illiquid stocks with low free floats. With relatively few shares available for trading, prices proved easier to inflate. Tera investment fund, for example, generated a return of more than 1,500 percent over the past year, which the report called “totally illogical by any market calculation or method.”
Authorities gave themselves six months to sell the funds’ assets and repay investors. Experts were pessimistic about how much investors would recover, and many likely won't receive the inflated gains shown in their holdings. Many affected investors were believed to be ruling-party voters, a factor that could raise the political cost for the administration.
Fatma Betul Sayan Kaya, a deputy head of the ruling Justice and Development Party (AKP) and family minister from 2016 to 2018, is the most prominent political casualty so far. She resigned on Sunday after the opposition accused her of making substantial profits from share sales shortly before the funds crisis triggered a major stock market sell-off on 16 September.
Brokerage firms and financial groups accused of involvement in the alleged schemes, including Tera Group and Pusula, had politically connected figures on their boards. Tera and others denied wrongdoing. One of Erdogan’s chief advisers served on the board of Tera Portfolio Management until January 2026. Another former presidential adviser remained on the board until the crisis erupted, while his brother, a former ambassador, also sat on the boards of several companies under Tera Holding.
Arrests and frozen assets
Authorities arrested Tera Group chairman Emre Tezmen on charges of running a Ponzi-like scheme. Until his arrest, he had also served on the board of the Central Securities Depository of Turkey (MKK), the official institution responsible for electronic recording, safekeeping and transfer of securities and other financial instruments. Tezmen denied wrongdoing. Muhammed Yariz, chairman of Pusula Portfolio, was also recently arrested; he was known for past work within the AKP.
Justice Minister Akin Gurlek announced on Friday that authorities had frozen the assets of 46 legal entities, 18 funds and 42 individuals after reviewing fund outflows between 1 July and 16 September. Authorities also imposed travel bans on 37 suspects as a judicial-control measure. The measures blocked asset transfers, sales, large cash withdrawals and other transactions that could reduce assets available for recovery.
The order affected investment firms, financial services companies, insurers, food producers and other businesses, including Tera Yatirim, Pusula Yatirim, Ulusoy Un, Tatilbudur, Enuygun, Astor Enerji, IC Ictas, Emin Evim, Turkiye Hayat ve Emeklilik, Yayla Agro, Turkiye Sigorta and Katilimevim. It prompted fears of severe disruption when Borsa Istanbul reopened on Monday. Authorities reversed the order on Sunday.
Government response and repayment
Kaya’s disputed trades primarily involved shares in Ozata Denizcilik, a shipbuilder involved in Turkish navy projects. The company’s connections to politically connected families raised questions about links among businesses, regulators and government officials. Tera’s brokerage reportedly controlled 95 percent of Ozata Denizcilik’s shares at one point, and the shipbuilder’s valuation surged to $5bn.
Erdogan addressed the controversy on Monday and pledged to pursue those responsible for market manipulation and fraudulent trading schemes. “Whoever lays a hand on the nation’s rights, assets or legal interests will face us and the state,” he said.
The mechanism for repaying investors remained undecided. Erdogan was due to chair a committee meeting on Tuesday to discuss next steps. An Ankara insider said: “Erdogan will have to genuinely go after this to show that he doesn't forgive such transgressions, because the political cost could be worse than people imagine.”