Turkey Detains 26 in Fund Scandal Probe as Minister Vows Recovery and Stronger Oversight

Police on Wednesday detained 26 people, among them a former Finance Ministry official and executives of portfolio management firms, in an investigation into a multibillion-dollar investment fund scandal that has shaken Turkey’s capital markets, according to state-run Anadolu news agency and other Turkish media.

Prosecutors had ordered the detention of 31 people. Police were still searching for the other five, including Nusret Altınbaş, owner of the privately held conglomerate Altınbaş Holding, the state-run agency reported. Altınbaş’s brother is already in custody and the family’s assets have been frozen.

The suspects include 16 executives and employees of five portfolio management firms already named in the investigation: Atlas, Pardus, Hedef, Tera and A1.

The scandal emerged in mid-September when several investment funds could not meet withdrawal requests. Prosecutors are investigating allegations of market manipulation affecting the savings of about 455,000 individual investors. The Justice Ministry said on October 4 that 85 people had been jailed pending trial in connection with the affair.

**Minister: All Profiteers Identified**

Treasury and Finance Minister Mehmet Şimşek said Tuesday that authorities have identified everyone who profited from market-disrupting activities linked to the scandal. He spoke to Habertürk and Bloomberg HT news outlets.

“Everyone who profited from market-disrupting activities has been identified,” Şimşek said, without naming those involved or providing a total number.

Recovery efforts will begin with individuals and companies that made inflation-adjusted gains of at least 10 million lira ($202,000), Şimşek said. “If there is no voluntary return, the justice ministry will initiate the relevant legal procedures,” he added. “Those who colluded will be pursued through their personal assets.”

Turkey’s “effective remorse” provisions allow those responsible for certain market manipulation offenses to avoid punishment or receive reduced sentences by paying the Treasury at least twice the gains obtained. Payment before a criminal investigation begins means no sentence is imposed; payment during the investigation reduces the sentence by half; payment during trial, before a verdict, reduces it by one-third.

**Regulatory Shake-Up**

The crisis has triggered a shake-up at the top of Turkey’s financial regulatory bodies. Capital Markets Board (SPK) Chairman Mahmut Sütcü submitted his resignation Monday, citing health problems, after about five months in office. President Recep Tayyip Erdoğan removed him through a decree published early Tuesday.

Deputy Treasury and Finance Minister Osman Çelik also requested retirement Monday, about two weeks after his son-in-law, İskender Balcı, was jailed pending trial in a related stock manipulation investigation, Anadolu reported. Neither departure was officially tied to the scandal.

A separate decree removed Sütcü’s predecessor, İbrahim Ömer Gönül, from his subsequent post as head of the Public Oversight, Accounting and Auditing Standards Authority (KGK), days after prosecutors received permission to investigate his conduct at the SPK.

**Political Fallout**

President Recep Tayyip Erdoğan on Wednesday pledged to bring those who profited from manipulation before the courts and accused critics of spreading misinformation. “Baseless rumors and ravings of those who are neck-deep in corruption” should be disregarded, he said.

His remarks followed opposition questions about whether two ministers profited from investments in the funds under investigation. Both have denied the allegations.

Former family minister Fatma Betül Sayan Kaya resigned from the AKP’s leadership in September following allegations that she and her husband profited from stock transactions before the crisis. Both deny the allegations.

Five journalists have been detained over their coverage of the scandal, accused of spreading misinformation. Two were jailed pending trial over an image suggesting a link between the AKP’s spokesman and a key suspect. Two others were detained over a report questioning a minister’s investments, while a fifth journalist was released under judicial supervision.

**Liquidation and Payments**

Regulators ordered the liquidation of 131 funds managed by seven companies. Şimşek said 66 of those funds have been completely liquidated, along with the completion of liquidation at three portfolio management companies: A1 Capital, Pardus and Bulls.

Payments totaling 40.8 billion lira, about $823 million, had reached 45,747 accounts, Şimşek said. Investors in stock-heavy funds received an average of 58 percent of their September 17 portfolio values, reflecting a decline in share prices. That 42 percent reduction is measured against the funds’ September valuations, not investors’ original deposits.

A bill that cleared a parliamentary committee last week would permit interim payments of up to 1 million lira, about $20,000, per eligible investor, depending on available assets. The payments would come from fund holdings and recovered money rather than the Treasury. The bill still requires approval by the full legislature.

**Stronger Oversight Pledged**

Şimşek said Turkey would “significantly increase sanctions relating to manipulation and other market-disrupting actions” and “strengthen supervision and oversight,” as well as addressing any gaps in legislation.

His remarks followed a warning last week from MSCI, the US-based index provider, which restricted changes to its Turkish indexes over concerns about “possible coordinated trading.” MSCI warned it could consider downgrading Turkey from emerging-market status if improvements are not evident by June 2027.

Şimşek said Turkey had already started addressing the issues MSCI identified. “Although the whole process was somewhat challenging … everyone with common sense says the Turkish capital markets will be much healthier,” he said.