A severe crisis in Turkey’s fund industry has sent stocks on the Borsa Istanbul tumbling, exposing deep vulnerabilities in market oversight and regulatory enforcement. The turmoil stems from the meteoric ascent and subsequent collapse of Tera Group, a boutique firm that transformed from obscurity into the talk of Istanbul in a matter of months.
Late last winter, Tera’s stock had improbably skyrocketed 2,000%, bringing vast wealth and fame to founder Emre Tezmen and his inner circle. Tezmen acquired a steel-gray Learjet 60, secured seats on corporate and university boards, and initiated a project to build Mediterranean villas in Spain. Inside Tera’s Istanbul headquarters, however, alarm bells were ringing. Executives grew increasingly uneasy as Tezmen brashly marketed the firm as the Goldman Sachs of Turkey on social media, drawing a massive influx of retail investor cash that required heavy leverage to sustain its spectacular returns.
Internal disputes escalated by February, leading to a shouting match and physical altercation between Tezmen’s trusted lieutenant, Emir Munir Sarpyener, and other top executives. Several officials chose to resign rather than approve transactions they opposed. Meanwhile, stock exchange inspectors flagged unusual market moves to superiors, noting a strategy that relied on funds buying illiquid shares and borrowing to purchase even more. Finance Minister Mehmet Simsek attempted to warn the market in November, declaring that it was not a playground, though it took another ten months of engineered financial profits for the bubble to burst.
Tera’s signature creation, an investment fund known as TLY, focused on initial public offerings where the firm and its imitators used leverage to drive prices higher in a circular strategy. Other techniques involved recycling cash from corporate bonds through inflated valuations. Kamil Dimmich, a partner at North of South Capital LLP in London, described the mechanism as a transparently manipulated bubble underpinned by absurd valuations.
Critics who attempted to sound the alarm faced swift retaliation. Ramazan Basak, a former official of the financial crimes watchdog, had urged regulators to block Tera’s 2022 public offering and subsequently accused the firm of artificial price inflation. Basak was detained twice by police, including once in front of his grandchild in 2025, under accusations of spreading misleading information. Other market participants reported receiving threatening phone calls and online harassment after criticizing the firm online, while two money managers stated they met privately with Capital Markets Board officials in 2025 and 2026 but refused to submit written objections out of fear that regulators were too sympathetic to Tera.
International scrutiny intensified by the summer of 2025, with index provider MSCI Inc. threatening to review Turkey’s emerging market status due to recurring instances of coordinated trading behavior. By July, Tera’s stock plunged roughly 60% as nervous investors rushed for the exits. Tezmen pleaded for patience, promising to repay losses if investors stayed, and briefly stabilized prices by purchasing blue-chip stocks. However, smaller mimicking funds such as Pusula Portfoy faced insurmountable losses and collapsed by August.
Although Tera announced plans to acquire Pusula in September, the rescue deal collapsed amid skyrocketing defaults. Tera disclosed more than 300 billion liras, equivalent to $6 billion, in unfulfilled redemption requests. Tezmen blamed the collapse on an organized speculative attack and panic triggered by new regulatory rules. Pusula’s chairman, Muhammed Yariz, denied fleeing the country and stated he visited the prosecutor voluntarily; he has since been jailed pending trial on market manipulation and fraud charges.
The market crash swiftly evolved into a political crisis for President Recep Tayyip Erdogan. In September, Erdogan convened an emergency meeting with his economic team, upbraiding ministers for failing to contain the issue. Authorities launched emergency measures, including small investor compensation, a fund to recover illiquid assets, and a liquidation board overseen by the vice president to manage over 100 funds holding some $20 billion. Erdogan also vowed to cleanse markets of greedy parasites.
Despite stabilization efforts, local fund managers remain wary, and MSCI has maintained pressure by signaling it may strip Turkey of its emerging market status without credible enforcement against coordinated trading. In response to the crisis, Erdogan removed the chief markets regulator. For Basak, the episode highlights a pervasive climate of fear regarding public policy flaws, though he continues to call for full transparency regarding who profited from the rally.
