ISTANBUL — Turkey has detained five more finance executives as prosecutors widen an investigation into capital-market transactions following a liquidity crisis that forced authorities to freeze and liquidate 131 investment funds worth hundreds of billions of Turkish lira.
The latest detentions add another layer to a financial-market turmoil that has already triggered arrests, asset freezes, trading restrictions and emergency measures by Turkish regulators and the central bank.
On Sept. 19, Istanbul prosecutors ordered the detention of Pusula Holding Chairman Serdar Turhan and Tera Yatırım executives Emre Tezmen, Alper Öztürk, Emre Alkin and Kerem Alkin, according to Turkish authorities. TRT Haber and Anadolu Agency independently reported the five detentions.
The investigation concerns suspected irregularities in capital-market transactions. The allegations remain under investigation, and the detentions do not by themselves establish criminal liability.
The investigation comes after a dramatic fund liquidity crunch
The case erupted into public view after several investment funds struggled to meet investor redemption requests.
Pusula Portföy and Tera Portföy disclosed problems meeting some redemption obligations, contributing to a sharp selloff in Turkish equities.
Reuters reported that Turkish authorities moved to stabilize the financial system after investment funds encountered liquidity problems, with regulators suspending transactions in funds managed by seven portfolio-management companies.
The Capital Markets Board, known as the SPK, subsequently ordered the liquidation of 131 funds associated with seven portfolio managers.
Those managers include Tera, Pusula, Hedef, Atlas, A1, Pardus and Bulls Portföy.
More than $18 billion of funds are being liquidated
The scale of the intervention is substantial.
The affected funds hold more than 890 billion Turkish lira, equivalent to about $18.3 billion, according to figures reported after the regulator’s liquidation decision.
The number of investors affected is reported differently by various sources, illustrating the difficulty of establishing a single final figure while the liquidation process is underway.
Reuters cited a source estimating about 353,000 investors, while other reports have cited figures exceeding 500,000 investor accounts.
The distinction is important: an investor can hold multiple fund accounts, so investor numbers and account numbers are not necessarily interchangeable.
Two major banks have been brought in
Turkey has turned to two of its largest banks to oversee the liquidation.
Türkiye İş Bankası was assigned responsibility for the affected Tera funds, while state-owned Ziraat Bank was tasked with handling funds connected to the other six portfolio-management companies.
The banks are expected to sell or otherwise convert fund assets into cash and distribute proceeds to investors according to their holdings.
The liquidation process was initially expected to take around three months, although regulators can extend the period if necessary. Payments can also be made in stages as assets are converted into cash.
Four suspects had already been jailed
The Sept. 19 detentions follow earlier arrests in the investigation.
Turkish authorities had previously detained four people, with at least some subsequently remanded in custody pending further proceedings. Travel restrictions and asset freezes were also imposed on dozens of people connected to the wider investigation.
Hurriyet Daily News reported that 51 people had been subjected to travel bans and asset-related measures, while prosecutors continued examining capital-market transactions.
The Justice Ministry said five additional people were detained on Saturday as part of the investigation into the fund liquidation crisis.
Regulators are also investigating alleged market manipulation
The fund crisis has been accompanied by a separate but related regulatory investigation into suspected manipulation of shares in several listed companies.
Turkey’s Capital Markets Board said it had filed criminal complaints against 38 individuals and imposed two-year trading bans in connection with alleged manipulation involving shares of Katilimevim, Gündoğdu Gıda and Destek Finans Faktoring.
Pusula Portföy was also subject to a two-year trading ban in the regulatory action.
Authorities have not established that every fund involved in the liquidation participated in manipulation, and the investigations remain ongoing.
That distinction is crucial because the liquidation of 131 funds is a regulatory action to protect investors and manage the market disruption; it is not itself proof that all of those funds or their managers committed wrongdoing.
Why the allegations have attracted attention
The controversy centers partly on the unusually large positions some funds reportedly held in relatively illiquid shares.
Euronews reported that Pusula-managed funds had accumulated substantial positions in companies including Katilimevim and Gündoğdu Gıda, while Tera-managed funds held significant positions in Destek Finans.
Such concentrated positions can become particularly problematic when large numbers of investors simultaneously request withdrawals.
A fund may show a high valuation on paper while still having difficulty converting illiquid securities into cash quickly enough to satisfy redemption requests.
That appears to have been a key pressure point in the recent crisis.
The market had already suffered a sharp selloff
The fund problems spilled into Turkey’s broader stock market.
Reuters reported that the BIST 100 index fell sharply during the turmoil before recovering some losses after authorities announced measures to provide liquidity and contain the situation.
The Financial Times reported that the benchmark had fallen more than 8% during the week before rebounding as authorities intervened.
The episode has therefore become more than a dispute involving individual investment funds. It has raised broader questions about liquidity, valuation practices, market concentration and the ability of investors to exit positions during periods of stress.
Turkey says the problem is contained
Turkey’s government has sought to reassure investors that the turmoil does not represent a broader systemic banking crisis.
Treasury and Finance Minister Mehmet Şimşek said the troubled segment had effectively been isolated and that roughly 90% of the investment-fund market continued to operate normally.
He also said regulatory changes and other measures should prevent the liquidation process from creating broader contagion.
The Financial Stability Committee likewise characterized the fund problems as temporary and manageable.
The central bank has also taken steps to provide additional lira liquidity, while regulators temporarily adjusted certain market rules to ease pressure on financial institutions and investors.
What triggered the crisis?
The precise chain of events remains under investigation, but the immediate pressure came from a wave of redemption requests.
When investors seek to withdraw money from a fund, the fund manager generally needs enough cash or sufficiently liquid assets to meet those requests.
If the portfolio is heavily concentrated in thinly traded shares, selling large positions quickly can push prices sharply lower.
That can create a feedback loop:
investors withdraw → funds sell assets → prices fall → portfolio values decline → more investors seek to withdraw.
Authorities are now investigating whether alleged market manipulation or unusually concentrated investment positions contributed to the instability.
The bigger question: was this a contained fund crisis?
For now, Turkish officials say the problems are contained.
But the scale of the intervention shows why authorities moved quickly.
The regulator has frozen and ordered the liquidation of 131 funds, placed major banks in charge of returning assets to investors, restricted the activities of numerous market participants and launched criminal investigations into suspected capital-market violations.
At the same time, authorities have emphasized that the problem affects only a limited portion of Turkey’s broader financial system.
Whether that assessment holds will depend on how smoothly the liquidation proceeds, whether investors receive proceeds without major disruption and whether additional irregularities emerge from the ongoing investigations.
What investors are watching now
The immediate focus is on three areas:
First, the liquidation. Investors will be watching how quickly the 131 funds can convert assets into cash and distribute proceeds.
Second, the investigation. Prosecutors and regulators are continuing to examine suspected market manipulation and capital-market transactions.
Third, contagion. Authorities will need to determine whether similar liquidity or valuation problems exist elsewhere in Turkey’s investment-fund industry.
The latest detentions show that the legal investigation is expanding even as the government tries to stabilize the financial markets.
For investors, the most consequential question may now be whether Turkey’s emergency measures can contain the damage — or whether the investigation uncovers a deeper network of concentrated positions and market practices behind the sudden liquidity shock.
The funds are being liquidated. The executives are facing investigation. Billions of dollars are at stake. What remains unclear is how far the fallout will ultimately reach.
