Turkey’s $17bn fund scandal becomes a political crisis for Erdogan

Turkey’s $17bn fund scandal becomes a political crisis for Erdogan

Submitted by Ragip Soylu on Tue, 09/29/2026 - 10:22 President vows accountability as the liquidation of 130 investment funds exposes ties to Turkey’s ruling elite A picture taken in Istanbul shows US dollar banknotes and Turkish lira banknotes, 27 January 2021 (Ozan Kose/AFP) Off

A crisis involving Turkish investment funds accused of running Ponzi-like schemes has affected half a million people, with authorities ordering the liquidation of some 130 funds worth $17bn earlier this month.

Already historic in scale, the financial turmoil has quickly become a major political crisis for President Recep Tayyip Erdogan’s administration, exposing a web of connections between the funds, their managers and the ruling elite.

The most prominent political casualty so far has been Fatma Betul Sayan Kaya, a deputy head of the ruling Justice and Development Party (AKP) and family minister from 2016 to 2018. 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.

Erdogan addressed the controversy on Monday, pledging 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 funds in question concentrated their holdings in illiquid stocks with low free floats, making their prices easier to inflate because relatively few shares were available for trading. For example, the Tera investment fund generated a return of over 1,500 percent over the past year, a figure that is totally illogical by any market calculation or method.

Authorities have set a six-month timeline to sell the funds’ assets and repay investors. But experts are pessimistic about how much investors will recover, with many unlikely to receive the inflated gains reflected in their holdings. Many of those affected are believed to be ruling-party voters, potentially increasing the political cost.

Brokerage firms and financial groups accused of involvement in the alleged schemes, including Tera Group and Pusula, have politically connected figures on their boards. Tera and others deny 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.

'Whoever lays a hand on the nation's rights, assets, or legal interests will face us and the state'

- President Erdogan

Tera Group chairman Emre Tezmen, who has been arrested on charges of running a Ponzi-like scheme, also held a senior position in Turkey’s capital markets infrastructure. He served on the board of the Central Securities Depository of Turkey (MKK) until his arrest, the official institution responsible for the electronic recording, safekeeping and transfer of securities and other financial instruments. Tezmen denies wrongdoing.

Muhammed Yariz, the chairman of Pusula Portfolio, has also recently been arrested. He is known for his past work within the AKP.

The connections extend beyond the investment firms themselves.

Kaya’s disputed trades primarily involved shares in Ozata Denizcilik, a shipbuilder involved in projects for the Turkish navy. The company’s links to politically connected families have raised questions about the overlap between businesses, regulators and government officials.

An Ozata Denizcilik board member arrested on Monday is the son of a former member of the banking regulator that approved Tera Investment Bank, a sister company of Tera’s brokerage business.

At one point, Tera’s brokerage reportedly controlled 95 percent of Ozata Denizcilik’s shares. The shipbuilder’s valuation surged to $5bn, exceeding those of major Turkish companies such as automaker Ford Otosan and steel producer Eregli.

The arrested board member is also the son-in-law of a deputy finance minister, linking him to the very ministry now tasked with helping resolve the crisis.

In a statement on social media, the board member denied the charges, stating that he surrendered to the authorities voluntarily in order to clear his name. 

It remains unclear how far accountability will extend. Rumours circulating in Ankara suggest that other senior officials may have been involved, either by turning a blind eye to questionable activities or by investing themselves. Those claims remain unverified.

High 'political cost' expected

The authorities’ response has also been marked by missteps.

On Friday, Justice Minister Akin Gurlek announced 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. Travel bans were also imposed on 37 suspects as a judicial-control measure.

The measures blocked asset transfers, sales, large cash withdrawals and other transactions that could reduce the assets available for recovery. They also required capital market instruments to be frozen and suspicious transactions to be reported to judicial authorities.

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The affected entities spanned investment firms, financial services companies, insurers, food producers and other businesses. They included 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 raised fears of severe disruption when Borsa Istanbul reopened on Monday, prompting the authorities to reverse it on Sunday.

Astor Enerji, one of the exchange’s largest listed companies, with a market capitalisation of $5.3bn, said on Monday that the restrictions and freezing orders affecting it had been lifted. Its operations were continuing uninterrupted, the company added.

Despite the reversal, the fallout continued, with Turkish stocks falling 2.38 percent on Monday.

Erdogan is due to chair a committee meeting on Tuesday to discuss the next steps, with the mechanism for repaying investors still undecided.

Some analysts in Ankara believe the government may have to sacrifice more politically connected figures, as it has the former family minister, to contain public anger. They argue that the scandal is unlikely to have a major impact on the 2028 presidential election.

Others disagree.

“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.

Economy Istanbul, Turkey News Post Date Override 0 Update Date Mon, 05/04/2020 - 21:19 Update Date Override 0