Stock market scandal in Turkey: Manipulation of 131 funds shakes trust

A stock market manipulation scandal threatens to shake Türkiye's confidence in its financial market. In 131 funds, enormous price increases are said to have occurred with the help of illegal agreements. One of the companies pushed in this way was even briefly ranked second among Türkiye's most valuable companies.

According to Finance Minister Mehmet Şimşek, the total volume of these funds is the equivalent of around 16 billion euros, a tenth of the entire Turkish fund market. It would be the biggest stock market scandal in Turkish history.

The investigative authorities take action

With these sums, the Turkish financial market supervisory authority is also forced to act. On September 17th, it will freeze the affected funds so that no money can flow in or out. The funds are now to be liquidated within six months.

And the Turkish authorities are also taking criminal action against those allegedly responsible. Four managers of the relevant corporations were arrested on the same day. Around a week later, the number of arrests is already at 26, and more than 60 people are now under investigation.

Finance Minister sees no systemic risk

The fact that the authorities are acting so massively and with such high publicity should also act as a signal. In his statement, Finance Minister Şimşek emphasized several times that these funds pose no risk of infection: "What happened last week is a credit and liquidity problem in a limited number of funds; that is, there is no widespread systemic risk." Türkiye's financial center is safe, that was probably the main message.

In fact, the alleged manipulations concern a very specific part of the entire stock market: Most of the 131 funds affected were so-called money market funds, which invest primarily in fixed-interest securities with a short term. A model that is actually considered relatively safe.

The manipulations probably affected so-called penny stocks, i.e. very cheap stocks that were rarely traded. Some enormous profits were reported here. According to media reports, a fund managed by the investment firm Tera Portföy has recorded a return of more than 17,000 percent since the beginning of 2025.

Chain reaction causes the system to falter

Such a system was bound to collapse sooner or later, says economist Onur Çanakçı. "Suppose a security is actually worth one lira. But you drive the price up to five, ten, twenty or forty lira. If investors then want to sell at some point, they will of course no longer find any buyers at a price of forty lira."

The Turkish Securities and Exchange Commission (SPK) was aware of the risk. In August, the SPK introduced new upper limits for the ownership of individual shares. What followed was a chain reaction: In order to meet this upper limit, the funds had to sell shares, which in turn caused prices to slide and caused unrest, especially among institutional investors. According to media reports, they tried to withdraw their money from the funds within a short period of time. The funds were no longer able to service this enormous sum, around a third of the total volume.

Small investors in particular suffer

In total, more than 400,000 individual investors are said to have been involved in the now frozen funds, a large proportion of which were probably small investors. In Turkey, many people are trying to save their savings from the extremely high inflation that has been going on for years using stock transactions. Officially it is currently around 31 percent; independent experts even assume that the figure is more than 40 percent. However, the market returns can hardly be used to cope with the rapid devaluation of money.

This is probably one of the reasons why many people allowed themselves to be taken in by the funds' promises of enormous profits. For the economist Çanakçı one thing is clear: "This is a catastrophe for people. For some it was their child's school fees, for others it was money for an operation. But for everyone it means a significant financial loss."

The location loses trust

Another loser could be Türkiye as a financial and economic location. The confidence of foreign investors in the country has already weakened. This is due to the fluctuating price of the Turkish lira, but also to fundamental concerns, says Çanakçı: "Turkey doesn't have a particularly good image, especially when it comes to the way the rule of law works. Many local entrepreneurs relocate their activities abroad. If such events also occur on the stock exchange, how do you plan to attract foreign investors to Turkey?" The country urgently needs new donors. Çanakçı welcomes the authorities' decisive action all the more - even if they acted very late.

How much of their deposits investors will see again will become apparent in the liquidation process. This could take up to six months; the financial market supervisory authority SPK has just extended the deadline again. In addition, it must also be about those who earned money from the alleged manipulations, demands opposition leader Özgür Özel from the Yeni Parti and suggested possible involvement of politicians and officials. The effects of the scandal are likely to affect the country for a long time.