Turkey arrests former minister Kaya in investment fund scandal

An Istanbul court has ordered the detention of Fatma Betül Sayan Kaya, a former Turkish minister for family and social affairs who held a senior post in President Recep Tayyip Erdogan's Justice and Development Party (AKP) until this autumn. She is being investigated in a financial scandal that has affected roughly 455,000 investors and has now reached the country's political leadership.

Suspicion of privileged information

Investigators suspect Kaya had access to information unavailable to other market participants. The case involves alleged violations of capital markets law and membership in an organisation formed to commit crimes. Kaya served as minister from 2016 to 2018.

The inquiry focuses on trades in shares of the shipbuilding company Özata Denizcilik. According to prosecutors, Kaya bought the shares in April and sold them on 16 September, a day before the decision to liquidate investment funds. The shares were not sold on the market but transferred directly to the firm Tera Yatırım Menkul Değerler, and the money reached her account the same day, although the usual settlement period for such shares is said to be two business days. Investigators say the timing, size of the deal and Kaya's contacts with executives of the Tera group point to possible advance knowledge.

Kaya and her husband deny wrongdoing. Her husband and a former head of the capital markets regulator face a travel ban and a requirement to report regularly to authorities. Kaya resigned as AKP deputy chair in September and later left the party.

Origins and scale of the crisis

The crisis began when several investment funds could no longer pay out money to investors on time. The regulator decided to liquidate 131 funds managed by seven companies. It is suspected that the funds' value was artificially inflated using shares whose real value and saleability did not match what was promised. In September, share prices on the Istanbul stock exchange fell sharply.

More than 430 people are being examined in the investigation. Justice Minister Akın Gürlek reported this week that 112 people are in custody. There is no guarantee that selling the funds' assets will let investors recover all their money. Erdogan has pledged to hold those involved in market manipulation to account and stressed that settlements should come from liquidated fund assets and recovered money, not state funds.