Turkey arrests Tera brokerage founder as fund probe hits 450,000 investors
Turkish authorities have arrested the founder of brokerage Tera Yatırım and several other executives amid a probe into investment funds accused of running a Ponzi-like scheme. More than 450,000 investors in 131 funds now face up to a six-month wait to find out how much of their money will be returned.
Turkish prosecutors have ordered the arrest of Tera Yatırım founder Emre Tezmen along with four other people as part of an investigation into investment funds suspected of operating a Ponzi-like scheme. Also arrested were Tera board members Kerem and Emre Alkin, Tera Portföy general manager Alper Öztürk, and Pusula Finans Holding chairman Serdar Turhan.
The crisis emerged after several funds, including those managed by Tera Portföy and Pusula Portföy, struggled to meet investor withdrawal requests. The funds held large positions in thinly traded shares, meaning a rapid sale could push prices down and shrink the money available to repay savers. Tera Yatırım's fund management arm reported on 16 September that it had missed some payments to investors in two of its funds, while Pusula Portföy also reported delays.
How the funds ran into trouble
Some funds invested heavily in rarely traded shares, where even modest buying could inflate prices. Rising valuations made returns look attractive and drew in new investors, whose money flowed into the same or related stocks, while some managers also borrowed against their holdings to buy more. Warning signs had appeared earlier: in June, index provider MSCI flagged possible coordinated trading involving smaller Turkish listed companies that could be distorting prices, though it did not name any firm.
Efforts to limit the fallout
Turkey's Capital Markets Board has ordered the liquidation of 131 funds run by seven firms, affecting 455,758 individual investors. State-owned Ziraat Bank and İşbank will oversee the process. To avoid further price declines from rushed sales, the regulator extended the liquidation window from three to six months. Finance Minister Mehmet Şimşek put the funds' total value at around $18.3 billion and said he does not expect the crisis to spread further, noting the affected funds represent about 10% of the sector. Istanbul's stock exchange benchmark has dropped 12% since the crisis began last week.
