Turkey Freezes 131 Investment Funds Amid Market Crisis and Ponzi Allegations

Turkey is facing a severe market crisis after a local fund manager admitted an inability to fulfill customer withdrawal requests. This disclosure sparked widespread panic across the fund industry, leading to a crash of more than 8% in the country's stock market this week.

In response, regulators have frozen and ordered the liquidation of 131 investment funds. These funds hold a combined value of ₺890 billion, or approximately $18.3 billion, and impact roughly 350,000 investors.

The crisis stems from accusations that several large asset managers operated what officials described as a Ponzi-like scheme. These managers allegedly purchased illiquid shares in related companies to artificially inflate fund valuations, attracting retail investors with the promise of high returns.

The freeze was implemented after investors withdrew as much as $1 billion in a single day. Authorities acted to prevent a stampede of redemptions from causing a further collapse in asset prices.

The government has launched an extraordinary intervention to stabilize the market. The central bank reduced margin requirements from 35% to 20% to prevent automatic margin calls from exacerbating the sell-off, while the sovereign wealth fund began purchasing blue-chip stocks to support the benchmark index.

İşbank and Ziraat Bank have been ordered to manage the liquidation of the frozen funds. This process is expected to take at least three months, though regulators may extend this timeline.

Despite these measures, the underlying issue regarding the true value of the assets held within the frozen funds remains unresolved. The market continues to face pressure as the lira hits fresh all-time lows and 10-year bond yields remain above 32%.

The current stabilization efforts are focused on the surface level of the market. Whether the assets are actually worth their reported valuations is a question that has yet to be answered.