Turkey investment fund scandal widens as former Takasbank chief is arrested

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Turkey arrests former Takasbank CEO

Highlights

Turkey arrested former Takasbank CEO Yunus Arinci and two other financial executives.
Authorities are investigating alleged manipulation involving illiquid stocks and investment funds.
The crisis has affected nearly 500,000 investors, with 131 funds worth $20 billion ordered into liquidation.

Yunus Arinci, who resigned as chief executive of Turkey's settlement and custody bank earlier this month, was among those arrested, according to Bloomberg. Authorities also detained Ali Pasli, co-founder of digital Islamic lender Adil Katilim Bank, and Omer Murat Gulkan, chairman of OMG Capital Advisors. The specific charges against the three executives were not disclosed.

Investigation reaches senior financial executives

The arrests mark another expansion of a criminal investigation that has already led to the detention of dozens of prominent figures in Turkey's financial sector.

Prosecutors are examining allegations that investment funds accumulated shares in smaller, thinly traded companies before driving their market valuations sharply higher. Such practices can create substantial paper gains while leaving funds unable to sell their holdings at reported prices when investors demand their money back.

The crisis became public in mid-September, when several major funds with concentrated exposure to illiquid stocks failed to satisfy redemption requests. The resulting disruption exposed weaknesses in fund valuations, liquidity management, and oversight.

Takasbank, Adil Katilim Bank, and OMG Capital had not immediately responded to requests for comment. The reported arrests do not establish the executives' guilt, and authorities have not publicly detailed their alleged individual roles.

Regulatory leadership faces growing pressure

The investigation has also reached former regulatory officials, raising questions about how the suspected manipulation continued across the investment industry.

Over the weekend, a Turkish court ordered the arrest of Enver Usca, a former deputy chairman of the country's markets regulator.

On Wednesday, banking regulator chief Sahap Kavcioglu announced that he had asked President Recep Tayyip Erdoğan to accept his resignation. The announcement came as scrutiny intensified over the financial authorities' handling of the scandal.

Justice Minister Akin Gurlek previously described the suspected manipulation as involving an organized criminal network with alleged connections to senior financial officials. Those allegations remain subject to investigation.

Fund liquidations threaten investor confidence

The scale of the fund crisis presents a broader challenge for Turkey's financial markets. Regulators have ordered the liquidation of 131 funds with roughly $20 billion in combined assets, while nearly half a million investors have been affected by the turmoil.

Unwinding positions in thinly traded shares could prove difficult without triggering further price declines. The scandal also raises concerns about the reliability of fund valuations and the effectiveness of supervision.

For Turkish authorities, restoring confidence will depend on whether the investigation establishes accountability and whether regulators can manage the liquidations without further disruption. The arrests suggest the inquiry is still expanding, with consequences that could extend beyond the funds directly involved.

Earlier, we reported that Turkey arrests stock exchange chief after fund collapse hits investors.

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