IMPORTANT | Turkey’s Fund Crisis Reaches Its Inner Circle: Investigators Turn to the First Investors

A third wave of detentions is moving the investigation backwards — to the people who were inside some of the funds before ordinary investors could buy them. A former central bank deputy governor has been arrested, hundreds of thousands of investors are caught up in fund liquidations, and investigators are now following the money. The questions are becoming harder: who got in early, who got out with the gains, why did regulators act so late — and how much of the money can still be recovered?

By the Editorial Team of TLF

Turkey’s fund crisis has entered a more uncomfortable phase.

Until now, much of the public attention has been fixed on collapsing funds, spectacular market losses, detained executives and the increasingly urgent question of what will happen to investors’ money. Now investigators are looking further back — to the period before some of those funds were opened to a much wider group of investors.

That change matters.

On Friday, a court ordered the arrest of 11 more people, including Erkan Kilimci, a former deputy governor of Turkey’s central bank who later served on Tera’s board. According to T24, the latest decisions brought the number of people arrested in the investigation to 45.

Those arrests are part of an ongoing criminal investigation. They are not findings of guilt.

But the latest phase of the inquiry may prove more important than the headline number of arrests. Investigators are examining who held shares in funds before they became accessible to a broader investing public — and what happened to those holdings as prices subsequently rose.

The People Who Were There First

Serbestiyet reported on Friday that the third wave of the investigation is focused on 12 people whose accounts appeared in the Pusula closed-fund system before the fund was made available to the broader investing public through TEFAS.

Six of those people were detained in Friday’s operation, according to the report. The authorities are examining when the early investors entered the funds, how much they invested, what transactions they carried out and what gains they may have made as prices rose.

The distinction is essential: being an early investor is not evidence of a crime.

What investigators must now establish is whether early access was simply legitimate investment activity or whether anyone traded with information, coordination or advantages unavailable to the people who arrived later.

That means reconstructing the story transaction by transaction: who bought, when they bought, what they knew, when they sold and where the proceeds went.

The government’s Financial Crimes Investigation Board, MASAK, has already confirmed that it supplied prosecutors with information on shareholders who were present during periods when the funds were not traded through TEFAS or when investor access was restricted. Bloomberg HT, citing information from the authorities, reported that investigators are analysing those investors’ entry and exit transactions and the profits they made.

MASAK has also examined the financial movements of 117 current or former executives associated with Pusula Finans, Tera Yatırım, Hedef Holding, Bulls Yatırım and related financial companies. According to the same report, enhanced monitoring had prevented attempted transactions worth close to 2.5 billion Turkish lira by September 21.

The Tera Trail

Another set of figures illustrates why the early-investor question has become so important.

Serbestiyet, citing a MASAK report obtained by Bloomberg, reported that Tera’s TLY fund had just 11 investors at the end of 2024.

Two Tera companies controlled 99.38% of the fund’s shares. Nine individuals held the remaining 0.62%.

That is a striking snapshot of how concentrated the fund was at that point. But it is not, by itself, proof of who eventually made money from the price movements that followed.

For that, investigators need the entire chain of transactions.

And this is where the crisis changes character. The central question is no longer simply why funds ran into trouble. It is increasingly about what happened before the trouble became visible to the public.

The Money Question

For investors, however, there is a much simpler question.

Where is the money?

Writing in Yetkin Report, Mehmet Öğütçü argues that arrests alone will mean little to people caught in the crisis unless the authorities can trace potentially unlawful gains, recover assets where legally justified and establish how investors will be compensated.

That concern is no longer abstract. Hundreds of thousands of people have money tied to the affected funds.

Reuters reported on September 22 that regulators had ordered the liquidation of 131 funds affecting more than 353,000 investors and involving assets exceeding $18 billion. Other Turkish reporting and public discussion has put the number of investors directly concerned at roughly 455,000.

These figures should not be read as meaning that every investor has lost everything. They measure the scale of exposure to funds caught in the liquidation process, not a final calculation of individual losses.

But behind those numbers are people waiting to find out a very basic thing: how much of their savings they will get back.

The government is now working on that problem. Bloomberg HT reported that Treasury and Finance Minister Mehmet Şimşek is leading technical discussions involving 131 funds managed by seven portfolio-management companies, with officials examining how liquidation and payments to investors should proceed.

A Market Already Shaken

The damage is not confined to the funds themselves.

Reuters reported that the BIST-100 lost more than 8% during the previous week as redemption pressure hit funds holding large positions in shares that could not easily be sold.

That created a dangerous mechanical problem. When investors wanted their money back, funds needed cash. When some of their holdings were difficult to sell, they had to dispose of more liquid shares instead. Selling created further downward pressure, which in turn intensified anxiety among investors.

Regulators intervened, ordered the liquidation of 131 funds and introduced measures intended to stabilise trading.

There is an important qualification. Analysts cited by Reuters did not describe the crisis as a systemic threat to Turkey’s entire financial system. Their concern was more specific: losses for retail investors, weaknesses in market structure and another blow to confidence in the transparency and functioning of Turkish capital markets.

That distinction matters. So does the scale of what has already happened.

Could The Investigation Reach Politics?

President Recep Tayyip Erdoğan has now intervened publicly.

Speaking in New York on Thursday, Erdoğan said that anyone found responsible would be held accountable and that additional legal and administrative measures would be introduced if necessary. He also sought to contain fears about the wider economy, arguing that the problem was limited to a relatively small section of the capital market.

“There is no risk to either our financial system or the Turkish economy,” Erdoğan said, according to Bloomberg HT.

The investigation, however, is beginning to generate another question — one that cannot be answered simply by arresting fund managers.

Why was the problem allowed to grow this large?

Murat Yetkin raised that issue directly in Yetkin Report, asking whether the widening investigation could eventually extend into politics and whether political or bureaucratic protection played any role in the events surrounding the funds.

These remain questions and allegations to be investigated. The material publicly available so far does not establish that politicians protected the people under investigation.

Opposition leader Özgür Özel went further on Friday. According to Gazete Oksijen, Özel alleged that people with political connections had benefited and demanded that money be recovered for investors.

Those allegations have also not been established by the evidence made public so far.

Follow The Money

The investigation has already produced arrests, frozen accounts and seized assets. Authorities have also confiscated two private jets and a luxury yacht which prosecutors say are linked to executives under investigation, with an estimated combined value of around 1.8 billion lira, according to Bloomberg HT.

But seizures make for dramatic photographs. They do not yet answer the question confronting the people whose savings are trapped in the crisis.

For them, success will not ultimately be measured by how many executives are photographed entering courthouses.

It will be measured in money.

Who entered these funds before the wider public? Who sold during the extraordinary rise in prices? Who kept the profits? Were any rules broken? Could regulators have acted sooner? And, where wrongdoing is established, how much can actually be recovered?

Turkey’s authorities have started identifying who was inside some of these funds before ordinary investors arrived.

Now comes the harder part.

They have to show where the money went.