A Turkish investment fund scandal that started as a stock market meltdown is now threatening Erdogan's political standin...

A Turkish investment fund scandal that started as a stock market meltdown is now threatening Erdogan's political standing at home and Turkey's credibility with global investors. More than 455,000 Turkish investors had money in over 100 funds now heading into liquidation, with combined value estimated between $18 and $20 billion. The Istanbul stock exchange took a heavy hit, and Turkey's five-year credit default swap spread jumped to its highest level since May. The numbers behind the scheme were staggering. The main Tera fund posted returns of over 60,000% in three years. Destek Finans Faktoring saw its stock surge roughly 7,000%, becoming Turkey's second-largest listed company just 17 months after its IPO. The mechanism was straightforward: funds accumulated large positions in small, illiquid stocks, driving prices up, attracting new investors, and using fresh money to buy more shares. The cycle worked as long as no one tried to exit. When regulators moved in late August to restrict funds from concentrating oversized positions in specific companies, the unraveling began. Fund managers were forced to sell, prices collapsed, and investors rushed for the exits. Some funds could no longer meet redemption requests. The political fallout is now hitting Erdogan directly. Fatma Betul Sayan Kaya, vice chair of the ruling AKP party and a former family minister, resigned after opposition allegations that she and her husband made massive profits trading shares in shipbuilder Ozata Denizcilik before the crash. The opposition claims the couple invested around 163 million lira and collected roughly 2.17 billion lira from share sales. Kaya has not directly addressed those figures. The Financial Times reported that prosecutors had already asked the Capital Markets Board back in February 2025 to investigate unusual trading activity. A former senior official from the financial crimes unit said he had repeatedly warned the authorities. Finance Minister Mehmet Simsek had also acknowledged signs of market manipulation as far back as last year. Turkey's MSCI emerging market status is now in question. A downgrade to frontier market would restrict where major institutional fun...