Turkish authorities have arrested the founder of an investment brokerage at the centre of a massive $18bn alleged Ponzi scheme. The scandal has raised critical questions about why regulators failed to act earlier to prevent the collapse, which has wiped out the savings of hundreds of thousands of investors. Emre Tezmen, chairman of Tera Yatırım, was arrested early yesterday alongside Tera board members Kerem Alkin and Emre Alkin, local media reported. Two other executives were also jailed pending trial, as part of the investigation into aggravated fraud and membership of a criminal organisation.
Turkey's Capital Markets Board (SPK) yesterday said the scandal had affected more than 455,000 investors who held stakes in 131 funds with a total of about $18bn in assets. The funds are now being liquidated. "God willing, the necessary steps will be taken in a short time to address grievances," justice minister Akın Gürlek said, adding that President Recep Tayyip Erdoğan was "closely following the investigation". Prosecutors have frozen the assets of executives at financial firms linked to the scandal and restricted transactions by their spouses and relatives, state-run news agency Anadolu reported.
The episode has come at an awkward time for finance minister Mehmet Şimşek, who has worked to restore confidence in Turkish economic management. So far there are few signs it could develop into a broader financial crisis. The benchmark Bist 100 share index appears to have steadied after it fell 8 per cent last week. Attention is now increasingly turning to why regulators did not intervene earlier to forestall the crisis, which erupted last week after some funds struggled to meet investor redemptions. Many funds had concentrated their portfolios in illiquid shares whose prices rose sharply when the funds bought them.
