Turkish authorities ordered the liquidation of about 130 investment funds worth $17bn earlier in September, after accusing them of running Ponzi-like schemes that affected half a million people. The scandal has become a major political challenge for President Recep Tayyip Erdogan’s administration, as investigators examine firms and figures connected to the ruling elite.
Fatma Betul Sayan Kaya, a deputy head of the ruling Justice and Development Party (AKP) and family minister from 2016 to 2018, resigned on Sunday. 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.
Erdogan addressed the controversy on Monday. He 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 Fund Crisis
The funds concentrated their holdings in illiquid stocks with low free floats, leaving relatively few shares available for trading. That structure made prices 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 wouldn’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 scandal’s political cost.
Brokerage firms and financial groups accused of involvement, 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 boards of several companies under Tera Holding.
Authorities arrested Tera Group chairman Emre Tezmen on charges of running a Ponzi-like scheme. Until his arrest, he served on the board of the Central Securities Depository of Turkey (MKK), which records, safeguards and transfers securities and other financial instruments electronically. Tezmen denied wrongdoing. Muhammed Yariz, chairman of Pusula Portfolio, was also recently arrested; he was known for past work within the AKP.
Politically Connected Companies
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, exceeding that of major Turkish companies including automaker Ford Otosan and steel producer Eregli.
Authorities arrested an Ozata Denizcilik board member on Monday. He was the son of a former member of the banking regulator that approved Tera Investment Bank, a sister company of Tera’s brokerage business. He was also the son-in-law of a deputy finance minister, whose ministry was tasked with helping resolve the crisis. In a social media statement, he denied the charges and said he had surrendered to authorities voluntarily to clear his name.
Rumours circulated in Ankara that other senior officials might have been involved, either by turning a blind eye to questionable activities or by investing themselves. The report said those claims remained unverified.
Asset Freezes and Market Fallout
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 restrictions blocked asset transfers, sales, large cash withdrawals and other transactions that could reduce assets available for recovery.
The affected entities included investment firms, financial services companies, insurers, food producers and other businesses, among them Tera Yatirim, Pusula Yatirim, Ulusoy Un, Tatilbudur, Enuygun, Astor Enerji, IC Ictas, Emin Evim, Turkiye Hayat ve Emeklilik, Yayla Agro, Turkiye Sigorta and Katilimevim. The sweeping order prompted fears of severe disruption when Borsa Istanbul reopened on Monday. Authorities reversed it on Sunday.
Astor Enerji, one of the exchange’s largest listed companies with a market capitalisation of $5.3bn, said on Monday that authorities had lifted restrictions and freezing orders affecting it and that operations continued uninterrupted. Turkish stocks nevertheless fell 2.38 percent on Monday.
Erdogan was due to chair a committee meeting on Tuesday to discuss next steps. The mechanism for repaying investors remained undecided. Some analysts in Ankara said the government might have to sacrifice more politically connected figures to contain public anger; other observers disagreed about the scandal’s likely effect on the 2028 presidential election. “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,” an Ankara insider said.