How did the Turkish Great Fund Crash Happen?
Judicial investigations launched against portfolio management companies and funds in the capital markets have become the most critical agenda item of the month for Turkish economics.
While the Ministry of Treasury and Finance implements measures to ensure liquidity and steps to protect investor rights, public critics raise concerns as a parliamentary motion to investigate the fund scandal has been rejected by the governing coalition, AK Party and MHP.
The crisis originated from credit, default, and liquidity issues affecting certain funds managed by portfolio management companies. During the Financial Stability Committee meeting, it was determined that the problem emerged from a liquidity crunch in funds belonging to a limited number of companies, mainly centring on Tera Portfoy and Pusula Portfoy.
The reason for the initial examination was that funds reported unconvincing sharp rises in assets and investors. Tera's TLY hedge fund returned 747% in lira terms between January and July 2025, when it had fewer than 200 investors. After becoming available to a broader investor base in July, its cumulative return climbed to more than 15,000% in lira terms by September. TLY attracted 102,616 investors and grew to $5 billion in assets, making it the largest of the funds being liquidated.
Authorities initiated urgent audit and review processes to safeguard the system as a whole and prevent a contagion effect, as the Capital Markets Board (CMB) reported suspicious transaction activities to judicial authorities.
On September 17, the Istanbul Chief Public Prosecutor's Office issued an official request to the Financial Crimes Investigation Board (MASAK) for comprehensive financial profiles.
Prosecutors scrutinised the executives' cross-border financial flows, crypto-asset transfers, and raw transaction data dating back to 2024. Following a series of arrest orders, the total number of individuals remanded in custody as part of the investigation, including holding company chairmen, fund founders, and board members, reached 51. A significant decision was reached regarding the judicial aspect of the investigation to enable the companies to continue their commercial activities. On September 28, the prosecutor's office lifted the asset-related measures imposed on 45 companies and 19 funds.
On the other hand, parliamentary inquiry motions submitted by opposition parties regarding developments in the fund crisis were debated at the General Assembly of the Grand National Assembly of Turkiye (TBMM), Thursday, October 8. Consequently, the motions on the matter submitted were rejected by the votes of AKP and MHP lawmakers.
Fatma Betul Sayan Kaya, President Tayyip Erdogan's ruling Party AKP's deputy chair and the family minister from 2016 to 2018, said she had asked Erdogan to relieve her of all her duties before the allegations could be investigated. The resignation came after an opposition politician shared a social media post alleging that she and her husband had made 2.17 billion lira ($44 million) profit trading Ozata Denizcilik shares ahead of the turmoil.
Erkan Kilimci, a former central bank deputy governor who later became a Tera executive, was also jailed, broadcaster NTV said.
Kilimci said in a LinkedIn post before he was jailed that it was "unlucky" to have his name caught up in the allegations due to the senior Tera post he occupied for three months.
As these prosecutions work their way through the courts, public scrutiny remains fixed, while key unanswered questions include who financed the initial funding, who sold the shares, and who walked away with the profits.
Writer: Cemre Sanlav
