Turkey is witnessing one of the largest financial cases in its modern history, against the backdrop of a large-scale investigation into suspicions of serious violations in the capital market, which has so far resulted in the arrest of 45 people out of 69 suspects, and the freezing of assets and sums estimated at hundreds of millions of liras, at a time when the funds of about 455,000 investors are linked to a massive liquidation of troubled investment funds.
According to press reports, including a report by journalist Eli Leon in the Israeli newspaper “Maariv”, the Turkish authorities arrested 11 additional suspects this week, bringing the number of those arrested to 45 people. At the top of the list of those arrested is Erkan Kilimci, who served as Deputy Governor of the Turkish Central Bank between 2016 and 2018, and was a member of the board of directors of the “Tera Yaterim” company. The arrests also included the president of “Tira Yatirim,” Emre Tazman, and the president of “Busola Holding,” Serdar Turhan, after their companies were unable to fulfill refund obligations to customers.
The roots of the crisis go back to September 14, with the arrest of the president of Busola, and the pace of events accelerated following the inability of a number of funds to pay their obligations. On September 16, the main index of the Istanbul Stock Exchange fell by 6%, prompting the Ministry of Treasury and Finance to hold a meeting of the Financial Stability Committee, which attributed the turmoil to liquidity and credit problems with a limited number of funds.
In emergency measures to contain the repercussions, the Turkish Capital Markets Authority decided to liquidate 131 funds managed by 7 different companies, with two major banks being assigned to supervise the process, which is expected to continue for about six months. The Authority explained that, as of mid-September, these funds were managing assets worth more than 800 billion Turkish liras, owned by 455,758 investors, while their final dues will be determined based on the selling prices of the assets of these funds.
In the course of the investigations, criminal complaints were filed on suspicion of market manipulation, bank accounts and cryptocurrency wallets of suspected officials were examined, and foreign money transfers were tracked. As part of the seizure procedures, the Financial Crimes Investigation Board froze about 387.5 million liras in fund accounts, in addition to other assets worth about 750 million liras (equivalent to about 15.3 million dollars).
On the other hand, Turkish President Recep Tayyip Erdogan sought to reassure markets and investors during his visit to New York this week, stressing that “there is no danger to our financial system or to the Turkish economy.” He explained that the problem is limited to a limited number of funds, stressing that the authorities will take all necessary measures and hold those responsible accountable before the law.
As the funds continue to be liquidated and prominent officials are pursued, the features of a financial crisis are unfolding that is testing investors’ confidence in the Turkish market, amid diligent government efforts to control its repercussions and prevent its spread to the financial system as a whole.
