An analysis of the fund-equity feedback loop, the evidence required to establish wrongdoing, and the distinct routes to investor recovery and regulatory accountability.

Prof. Dr. Vahit Bıçak | Bıçak Law Firm

As at 17 October 2026.

1. Introduction: Why the Investigation Matters

Türkiye’s investment fund investigation has brought together questions about securities pricing, the management of pooled savings and the effectiveness of financial supervision. The public controversy is often described as a “fund scandal”. Its legal significance, however, cannot be understood through that label alone.

The Capital Markets Board of Türkiye, commonly known by its Turkish abbreviation SPK, confirmed that liquidation decisions concerned 131 funds established by seven portfolio management companies, with 455,758 investors counted without duplication. These figures establish the scale of the affected investor population; they do not establish each investor’s loss or anyone’s criminal responsibility. Allegations remain subject to proof, and everyone under investigation is entitled to the presumption of innocence.[1]

The investigation also raises a practical question that punishment alone cannot answer: what assets can be preserved and recovered for investors? This article first examines the market structure and the publicly documented events, then considers potential offences, individual responsibility, compensation and supervisory accountability. An effective response requires reliable findings about both the transactions and the routes by which money can actually be returned.

Part I –  Factual Analysis: What Happened?

2. The Market Structure: Funds, Managers and the Underlying Shares

Several institutions appear in the same transaction chain, but perform different functions. An investment fund pools investors’ money in a portfolio. Investors hold units in that fund; they do not thereby become direct shareholders in every company whose securities it owns. The portfolio management company makes investment decisions within the applicable rules and the fund’s documents. Its own assets must be distinguished from those belonging to the fund.[2]

A holding company, a brokerage firm, a portfolio management company and an investment bank within a business group are also separate entities. Similar names do not establish identical activities, obligations or liabilities. This distinction is particularly important when discussing the Tera, Pusula, Hedef and Bulls groups.

Türkiye’s market infrastructure provides different records and services. KAP is the Public Disclosure Platform. MKK maintains dematerialised securities and right-holder records. Takasbank provides settlement and other market infrastructure services, while TEFAS is the electronic fund trading platform. Portfolio depositaries have custody and specified oversight responsibilities. The existence of these arrangements does not make a fund unit equivalent to an insured bank deposit.

Product categories matter as well. Money market funds and serbest fonlar operate under different investment and distribution rules. Translating the latter as “hedge funds” may be convenient, but does not import another jurisdiction’s regulatory regime. The relevant questions concern the particular fund’s eligible investors, permitted holdings, financing, valuation and redemption arrangements. A familiar distribution channel cannot replace that examination.

3. From Warning Signs to Liquidation: A Dated Chronology

The official record places the emergence of supervisory concerns before the public crisis. In its statement of 18 September, SPK described observations made in the final quarter of 2025 about funds and low-free-float shares. It also described an inter-institutional process that preceded the revised Investment Funds Guideline announced on 28 August 2026.[3]

The following chronology identifies the principal documented stages rather than attempting to reproduce every reported arrest or company announcement.

Sources: SPK, the Directorate of Communications, MSCI and Anadolu Agency.[3-8]

The sequence contains several different processes: supervisory rulemaking, fund liquidation, criminal investigation and legislative preparation. Their starting dates need not coincide. A liquidation decision does not establish when a criminal investigation legally began, and a reported arrest does not establish when all relevant proceedings were initiated. Those distinctions become particularly important when assessing procedural conditions or the timing of statutory repayment incentives.

Nor should the six-month maximum be read as a requirement that every fund remain unresolved for that period. SPK expressly stated that completion could occur earlier.[4]

4. The Alleged Fund-Equity Feedback Loop

The central economic concern involves concentrated holdings in shares with limited independent trading. Where a fund becomes a significant buyer of such shares, its purchases can influence the prices used to value positions it already holds. Strong reported performance may attract further subscriptions, which can support further purchases. Whether this mechanism operated unlawfully in a particular fund must be established from its transactions and decision records.

New subscriptions do not, by themselves, generate a return per fund unit: additional assets arrive alongside newly issued units. The potential feedback operates through the price impact of subsequent investment activity. Research on “self-inflated” fund returns offers a useful general framework, although its empirical examination of ETFs cannot establish what happened in Turkish funds.[9]

The reverse mechanism can be severe. Investors request redemption; the manager needs cash; selling reduces prices; falling fund values encourage further withdrawals. Sales of the easiest assets can also leave remaining investors with a portfolio that is harder to realise. The distribution of transaction costs between departing and remaining investors then becomes an issue of fairness as well as liquidity.

These dynamics do not necessarily require fictitious companies or nonexistent securities. A quoted price records a transaction at the margin. It does not guarantee that a large position can be sold at that price. Consequently, a position may have an observable market value but substantial execution costs when liquidated quickly. Whether its accounting valuation was appropriate is a separate inquiry into the applicable rules, market conditions and reliability of the price used.

The distinction also limits the usefulness of the Ponzi label. A classic Ponzi arrangement involves using later investors’ money to fund purported returns to earlier participants. Price pressure, concentrated ownership and redemption dependence do not, without further evidence, prove that arrangement. Calling a structure Ponzi-like may identify a concern about sustainability; it does not identify the acts and intentions necessary for a criminal conviction.

For this investigation, the useful questions are specific: which funds held which shares, who controlled the counterparty accounts, how were prices formed, and how did subscriptions, financing and redemptions affect the positions? The Financial Stability Board’s work on open-ended fund liquidity provides context for these questions, without determining liability under Turkish law.[10]

5. The Actors: Functions, Allegations and Responses

The seven portfolio management companies identified in the liquidation account are A1 Capital, Atlas, Bulls, Hedef, Pardus, Pusula and Tera. Their inclusion in a regulatory process does not establish that they shared one strategy or that every manager participated in the same alleged conduct. The relevant operational roles should be mapped before responsibility is considered.

Reported explanations that the difficulties were temporary liquidity problems must be tested against the same records as allegations of coordinated trading. Neither explanation is established by repetition. Individuals’ responses should be assessed on their actual content, not merely recorded as a denial.

Political office, family relationships and professional titles can help explain why a matter attracts attention. They cannot establish who gave an order, knew about a transaction or received a benefit. That requires evidence connected to the person and the relevant period.

6. Measuring the Scale: Assets, Gains and Losses

Large figures can obscure rather than explain this case unless their meaning is kept consistent. Assets under management describe a portfolio’s reported scale at a date. Net investment concerns money contributed and withdrawn under the relevant calculation. Trading proceeds include capital as well as potential profit. Unlawful benefit and compensable loss require further legal and factual analysis.

The same discipline applies to investor counts. SPK’s 455,758 figure is expressly a unique-investor count. Adding fund-level account totals may count the same person more than once. Equally, the 17 funds involved in the 8 October payment announcement were a subset of the broader liquidation population, not a replacement for the 131-fund figure.[1,6]

Published aggregate estimates should therefore not be presented as established investor losses without their original methodology. Extraordinary inception-to-date performance is also not the return earned by every investor: entry dates, partial withdrawals, fees, currency and inflation matter.

Finally, a fall in foreign investors’ portfolio value is not automatically an equivalent net capital outflow. Redemptions, security prices, exchange rates and changes in coverage must be separated before attributing a cash-flow figure to the crisis.

7. International Market Confidence: The MSCI Response

MSCI’s 15 October announcement addressed selected index changes, including increases in Foreign Inclusion Factors or share numbers, additions to the Turkey Investable Market Index and upward size-segment migrations. It did not suspend all Turkish trading or announce a completed market downgrade. It identified June 2027 as the point by which insufficient progress could lead to consideration of further measures, including consultation on reclassification.[7]

The underlying concern extends beyond a fund’s performance. International investors need ownership information that permits independent assessment of the shares genuinely available for trading. Several registered holders do not necessarily represent several independent economic interests.

The connection to the fund investigation is therefore an issue of market integrity and information reliability. It should not be expressed as a claim that the investigation alone caused the index decision, or that all potential selling by index-tracking investors has already occurred. The announcement provides evidence of MSCI’s treatment and concerns, not a judicial finding against any company or individual.

Part II – Legal Analysis: Liability, Evidence and Recovery

8. The Legal Starting Point: Investment Loss Is Not Automatically a Crime

A fund can lose money without a crime having occurred. A disclosed strategy can perform badly, a legitimate investment can become illiquid, and a manager can make an unsuccessful judgment. The criminal law does not guarantee investment outcomes.

That principle does not make all losses ordinary market risk. Investors do not consent to fabricated information, deliberately misleading trading or the diversion of entrusted assets simply by accepting volatility. A risk warning cannot convert such conduct into an authorised investment decision.

The analysis should distinguish at least four possibilities: a loss within the disclosed risk; a failure of professional care; a regulatory breach; and conduct satisfying a criminal offence. These categories may overlap, but their requirements differ. Administrative market-abuse measures under Article 104 of Capital Markets Law No. 6362 are not interchangeable with a conviction under Article 107.[2,11]

The relevant question is therefore not whether the result was disastrous. It is which duty or prohibition applied, what the person actually did, and what state of mind must be proved. Compensation may be available for a culpable breach even where intentional criminal conduct cannot be established. Conversely, transaction-based manipulation can be punishable without proof that a particular investor suffered a quantified loss.

9. Potential Offences: Different Conduct, Different Elements

Article 107 is central, but its two forms must be kept separate. Transaction-based manipulation under Article 107(1) concerns purchases, sales, orders, cancellations, amendments or account movements undertaken to create a false or misleading impression about prices, price changes, supply or demand. A genuine exchange transaction is not immune from scrutiny merely because it passed through ordinary systems. Its coordination, economic explanation and purpose matter.[2]

Information-based manipulation under Article 107(2) concerns false, incorrect or misleading information, rumours, news, comments or reports disseminated for the statutory purpose, with a benefit obtained through that conduct. A negative article, optimistic forecast or unsuccessful prediction is not automatically within this offence. Falsity, purpose and the benefit connection require separate proof.

Both forms carry imprisonment and judicial fines under the statutory framework. The benefit has different functions: obtaining it is not a separate constituent requirement of Article 107(1), although it affects the fine and repayment provisions; under Article 107(2), the statutory connection between misleading information and benefit is part of the completed offence. Treating every participant’s gain as interchangeable would erase that distinction.

Article 110 requires particular care because different provisions address different forms of misuse. Transactions benefiting related parties at the expense of a collective investment undertaking may raise questions distinct from personal appropriation of assets entrusted to an investment firm. The legal owner, decision-maker, recipient, consideration and economic purpose must be identified.[2]

Aggravated fraud may arise if investors were induced to invest through deception satisfying the Criminal Code, rather than merely exposed to an unsuccessful strategy. An allegation of criminal organisation requires proof of the necessary organised structure; a corporate chart or several participants is not enough. Banking embezzlement requires examination of the institution and the actor’s legally relevant capacity. A portfolio manager cannot simply be treated as a bank employee because both operate within the same group.[12]

Several classifications may be investigated, but their penalties cannot automatically be added together. The acts, participation and rules governing overlapping offences must first be resolved. A company may face regulatory measures, security measures where authorised and civil claims without being treated as a natural person capable of imprisonment.

10. Establishing Individual Liability: Evidence and Procedural Safeguards

The investigation must follow the decision as well as the money. Order timestamps can show coordination; transfers can identify funding and benefit; investment committee records can show who authorised exposure. None of those records should be interpreted without context, alternative explanations and attribution to the relevant person.

Account ownership is not necessarily operational control. A board position does not establish knowledge of every trade. Conversely, delegation does not answer evidence that a person knowingly directed or facilitated unlawful conduct. Expert analysis should explain the inference linking the person, transaction and statutory element, rather than merely describe an unusual price chart.

Article 115 makes SPK’s written application to the prosecutor a procedural condition for offences defined in or referred to by the Capital Markets Law. The general wording extends beyond insider dealing and market manipulation, subject to any applicable special procedures. The Board’s application is a condition of the criminal process, distinct from the permission mechanism for duty-related allegations against SPK officials under Article 133.[2]

SPK’s investigative material can be technically important, but the Board is not a substitute for the court. The underlying data, calculation of benefits, choice of comparators and expert methodology must remain capable of challenge. An automated flag is not proof of intention; a reproducible analysis of authentic records may nevertheless contribute to the evidence.

The Court of Cassation decisions discussed in our Turkish analysis illustrate the importance of their actual procedural scope. The Seventh Criminal Chamber’s decision of 1 April 2024, E.2021/15789, K.2024/3604, addressed, among other matters, the competent trial court for alleged online investment fraud. The Eleventh Criminal Chamber’s decision of 12 February 2026, E.2021/24479, K.2026/1555, concerned allocation between appellate chambers. Neither is a conviction establishing misconduct in the present fund investigation.[13]

11. Investor Recovery: Which Route Addresses Which Loss?

Investors need to identify both their entitlement and the mechanism capable of producing payment. Liquidation distributes a fund’s assets under the applicable rules. It does not promise the original subscription amount or the last published valuation. Interim payments are credited against eventual entitlements, not an additional award of damages.

SPK’s 1 October announcement concerned funds established by Tera, Pusula, Atlas and Hedef. It provided for payments based on reconciled net investments, capped at TRY 1 million per investor per fund. Payments would be deducted from final liquidation entitlements, and units would be redeemed at the final stage. This should not be converted into a blanket statement that every affected investor has been fully repaid.[5]

Article 107(3) applies to transaction-based manipulation. It requires payment to the Treasury of twice the benefit obtained or caused to be obtained, subject to a TRY 500,000 minimum. The consequences depend on timing: no penalty before investigation, a half reduction during investigation, or a one-third reduction during prosecution before judgment. This is not a general settlement of all potential offences.[2]

The voluntary accounts announced on 1 October serve a different function. SPK specified that fund-specific returns would enter the relevant fund’s liquidation estate, not another fund’s. A payment to such an account cannot simply be assumed to satisfy a statutory requirement for payment to the Treasury. Dülger’s analysis also emphasises the distinction between these arrangements and their separate criminal-law effects.[14]

Investors may additionally have claims against a manager, depositary or another responsible party under the applicable contractual, statutory or tort framework. Article 32 addresses liability connected with public disclosure documents; Article 56 concerns depositary obligations. Each claim needs its own breach, loss and causal connection. Earlier distributions must be taken into account to avoid double recovery.[2]

Asset preservation deserves early attention. Article 128 of the Criminal Procedure Code must be read alongside relevant special legislation, including Article 17 of Law No. 5549 for money-laundering proceedings. A catalogue-only analysis is incomplete. Seizure, confiscation, restitution and civil attachment have different conditions; foreign recovery also requires a traceable asset and an available cooperation or enforcement route.[15]

Investors should preserve unit records, orders, statements, disclosures and payments, and identify applicable limitation and pre-action requirements. A criminal complaint does not preserve every civil or administrative claim. Nor does fund distribution automatically fall within deposit insurance or the Investor Compensation Center’s narrower protection against specified intermediary failures. Guaranteed “fund recovery” offers create a further risk: professional authorisation, written scope and the actual recovery mechanism should be verified before payment.

12. Supervisory Accountability: Public Authorities and Private Gatekeepers

Supervisory accountability requires more than showing that a regulated investment failed. The inquiry must identify what the authority knew, what it was legally required and able to do, when intervention was warranted, and what loss that intervention could have prevented.

SPK’s own account of pre-crisis observations makes timing a legitimate issue. It does not resolve that issue. Preparing general rules and supervising particular suspect transactions are related but distinct functions. Evidence of consultation cannot, on its own, establish that individual risks were adequately addressed; a later collapse cannot, on its own, establish that every earlier decision was unlawful.[3]

A public-service-fault claim should identify a concrete supervisory failure and connect it to the claimant’s loss. For example, the claimant would need to examine whether an available measure would have prevented additional exposure or reduced an avoidable loss, rather than presume that earlier intervention would have preserved every quoted valuation.

The proper administrative route depends on the challenged act, omission and claim. Articles 12 and 13 of the Administrative Judicial Procedure Law govern different situations; prior application and filing requirements must be assessed accordingly. Article 133 of the Capital Markets Law separately addresses proceedings concerning SPK officials, including the direction of damages claims against the Board and the special permission mechanism for duty-related criminal allegations. Institutional compensation and an official’s criminal responsibility are different questions.[2,16]

Private gatekeepers also require individual examination. A depositary’s statutory oversight is more than passive safekeeping, but is not insurance against all market losses. An auditor’s responsibility depends on the report, engagement, standards and causal breach. The same discipline applies to distributors, valuers and market infrastructure providers.

Equal treatment is part of credible enforcement. Political connections must neither displace evidence nor confer immunity from scrutiny. Equally, criticism of the investigation or financial reporting should not be conflated with information-based manipulation without its specific elements. Public confidence depends on demonstrably consistent legal standards, not a particular number of people in detention.

13. Reform: Existing Rules, Pending Legislation and the 2027 Target

Three developments must remain distinct: the rules already introduced, the specific liquidation bill and the broader legislative programme announced by the finance minister.

Parliament’s record identifies the liquidation proposal as Bill No. 2/3939, submitted on 9 October. A parliamentary announcement records its approval by the Plan and Budget Committee on 14 October. Committee approval is not enactment. The proposal addresses realisation and recovery of assets, responsibility for losses and payments to affected unit-holders. As at 17 October 2026, the parliamentary record reviewed still lists it at committee stage. Its proposed mechanisms must therefore be distinguished from the SPK payment arrangements already announced.[17]

Separately, on 16 October Mehmet Şimşek announced a target of completing further legal changes by early 2027. Anadolu Agency reported that coordinated fund transactions would be addressed. That announcement does not supply a new offence, penalty or commencement date.[8]

The appropriate reform test is whether ownership disclosures, liquidity controls, independent oversight and recovery mechanisms can work together in practice. International recommendations, including IOSCO’s liquidity-management work, provide useful benchmarks but do not automatically bind Turkish funds.[18] Any new criminal rules must also respect the principles governing temporal application; a reform announcement cannot determine liability for earlier conduct.

14. Conclusion: Accountability Must Be Proven, Recovery Must Be Deliverable

The investigation should be assessed by the quality of its findings and the effectiveness of its remedies. Trading patterns must be explained, decisions attributed and benefits traced to particular actors. Recoverable assets must be protected before they disappear, and investor payments must rest on identifiable legal entitlements.

The same discipline applies to supervision: identify the duty, the failure and the harm it caused. Punishment, compensation and market reform perform different functions. A credible response requires all three to operate within their proper legal limits, while preserving the rights of investors and those under investigation.

Sources and legal references

References are to official announcements, legislation, judicial decisions and the research identified below. The applicable Turkish legislative text governs; English translations facilitate access.

1. SPK, 23 September 2026, Statement on the number of investors in funds subject to liquidation.
2. Capital Markets Law No. 6362, particularly Articles 32, 52–56, 84, 104, 106–110, 114–115 and 133. CMB-hosted English translation; official Turkish legislative text.
3. SPK, 18 September 2026, Regulatory process statement; CMB English version.
4. SPK, 21 September 2026, Extension of the liquidation period.
5. SPK, Bulletin 2026/67, 30 September 2026, decisions 64/1770 and 64/1775; interim payment announcement, 1 October.
6. Directorate of Communications, 8 October 2026, Statement concerning the liquidation process conducted by Ziraat Bankası.
7. MSCI, 15 October 2026, MSCI Implements a Freeze on the MSCI Turkey Indexes.
8. Mucahithan Avcıoğlu, Anadolu Agency, 16 October 2026, Türkiye targets stronger laws against capital market crimes by early 2027.
9. Philippe van der Beck, Jean-Philippe Bouchaud and Dario Villamaina, Self-Inflated Funds, Harvard Business School Working Paper 26-066. Used for the general price-impact mechanism, not as evidence about the Turkish investigation.
10. Financial Stability Board, 20 December 2023, Revised Policy Recommendations to Address Structural Vulnerabilities from Liquidity Mismatch in Open-Ended Funds.
11. SPK, Investor information on market manipulation.
12. Turkish Criminal Code No. 5237, particularly Articles 20, 37–44, 155, 157–158, 220 and 282; Banking Law No. 5411, Articles 160 and 162. Official texts: 5237 and 5411.
13. Court of Cassation, Seventh Criminal Chamber, 1 April 2024, E.2021/15789, K.2024/3604; Eleventh Criminal Chamber, 12 February 2026, E.2021/24479, K.2026/1555. Discussed in Vahit Bıçak, Borsa Manipülasyonu Suçu ve Cezası, updated 25 September 2026.
14. SPK, 1 October 2026, Voluntary return accounts announcement; Murat Volkan Dülger, Kamuoyunda “Fon Skandalı” Olarak Anılan Olaylar Hakkında: Ceza Sorumluluğu, Yatırımcı Hakları ve Denetim Sorumluluğu Bakımından Bir Değerlendirme, dated 1 October 2026, 19-page legal analysis.
15. Criminal Procedure Code No. 5271, particularly Articles 128 and 131; Law No. 5549, Article 17. Official Criminal Procedure Code; MASAK legislation page.
16. Administrative Judicial Procedure Law No. 2577, Articles 12–13. Official legislation access.
17. Grand National Assembly of Türkiye, Bill No. 2/3939, submitted 9 October 2026; committee approval announcement, 14 October 2026. The submitted text and committee-stage material are not presented as an enacted statute.
18. IOSCO, May 2025, Revised Recommendations for Liquidity Risk Management for Collective Investment Schemes, FR/10/2025.