The door closed on 17 September. That was fourteen days ago.
On Tuesday evening, after the government’s economic coordination meeting, the Presidency’s Communications Directorate issued a statement. A Fund Coordination Board has been set up under the Vice President. The State Supervisory Council, which reports to the Presidency, has opened a review of recent investment fund transactions. Three Islamic finance firms, Katılımevim, Birevim and İktisat Katılım, are being transferred to the state-owned Emlak Katılım bank.
The Capital Markets Board, Turkey’s securities regulator, had also presented a payment roadmap. Payments would go to investors whose claims have been reconciled, in line with each fund’s assets and liquidity.
That statement mentioned no one-million-lira threshold. It said nothing about public money, and nothing about dates. It described the method. Today, at last, the regulator announced the method’s first step.
I’ve written five pieces on this since the first day. In this one I’ll go back over all of them.
/////
My first judgment was incomplete, and I completed it in the second piece. In a bank run, the money is there but time isn’t. In a Ponzi scheme, there’s time but no money. This case sits somewhere in between.
In this story, liquidity and solvency are the pair people confuse most. Mistaking price for value is the oldest error in the book anyway.
The roadmap separates the first pair. Payment goes fund by fund, according to liquidity. A fund whose assets turn into cash quickly pays first. If you ask me, that’s an admission that the 131 funds aren’t suffering from the same disease.
But liquidity sets the order. It doesn’t set the distribution key.
Investors in the fund that pays first don’t get more. They just get it sooner. The final account will be set by the fund’s real value.
When we started, we assumed most of the victims were individuals. We soon learned that many companies had parked their cash in these funds too. That added a separate layer.
Not every queue is the same queue.
/////
My judgment on the front of the queue hasn’t changed.
According to Pusula’s own statement, its funds open on TEFAS, Turkey’s fund trading platform, shrank from 115 billion lira to under 8 billion. About 107 billion was paid out before the door closed. When exits speed up, losses aren’t shared by formula. They’re shared by order of arrival. Whoever leaves the table early gets the soup.
The story goes that when the run on Pusula began, Tera rushed to help with cash. That, it’s said, sped up Tera’s own collapse.
Once the door closed, the run moved to other doors.
Central Bank data reported by Bloomberg HT shows money market funds shrank from 2.14 trillion lira to 1.68 trillion in the week to 18 September. That’s 456 billion in one week. I don’t know how much of it came from the funds in liquidation. But when outsiders can’t tell sound from rotten, investors in sound funds run too.
The lesson from Irving Picard, the trustee who unwound the Madoff fraud, still holds. Don’t look at what’s left in the till. Look at what left it.
Here that lens has a limit. As far as I know, the tools we have depend on tort, crime or bankruptcy. They can reach the gains of those involved in a crime. They don’t easily reach an innocent investor who left in good faith at the screen price.
On 1 October the regulator opened a door into that gap. Those who made excessive gains by redeeming fund units before the liquidation decision can now hand them back voluntarily. A separate voluntary return account has been opened for each fund, in the name of TMSF, the Savings Deposit Insurance Fund. Money paid in goes only into that fund’s liquidation estate. It will be paid out to that fund’s investors.
Can consent reach where the law can’t? The notice doesn’t say what a person who pays back gets in return.
/////
My judgment on the state’s share hasn’t changed either.
Fault is one thing. A bailout is another.
In its 18 September statement, the regulator itself says it had been watching unexplained price moves since the last quarter of 2025. Some funds were driving them in thinly traded stocks. Months passed between that observation and the closing of the door.
That question now has an address. The State Supervisory Council’s review.
On the bailout side, the roadmap makes no reference to public money. A bridging mechanism funded by public money had been discussed. That door isn’t closed. It just hasn’t been opened.
As things stand, this isn’t a bailout. It’s a ranking, a setting of priorities.
/////
My view on the order of payment is the same. But this section changed after the piece was first published.
In a decision dated 30 September, the regulator ruled that interim payments be made before final liquidation. They go to reconciled investors in funds run by Tera, Pusula, Atlas and Hedef. The measure is each investor’s net investment, as calculated by MKK, Turkey’s central securities depository. Below one million lira, the full amount is paid. Above it, at most one million. Payments start with the money market funds.
Investors above one million also get their first million. For now, that’s the ceiling on the first payment. As collections come in, later payments may climb toward the reconciled amount.
Fund units aren’t being taken back. Remaining rights will be calculated at final liquidation. This is an advance that will be netted off later. It’s paid today, and the account stays open.
I’d asked whether payments would be made in batches. The decision says “without delay”.
Net investment hasn’t been defined yet. If it’s money paid in minus money taken out, the interim payment recognises what people put in, not the screen price.
The calculation is per person. But the payment looks set to come out of each fund’s own till. Funds with cash will pay first. Nothing says when an investor whose money sits only in a fund of shallow stocks will be paid.
Funds run by A1, Bulls and Pardus stay in liquidation. Their own portfolio management companies will carry it out.
According to the regulator’s 28 September notice, some exit orders placed on or before 16 September couldn’t be executed. The reason was the fund’s default, or its failure to publish a price. Those investors will also receive a pro rata share of the liquidation proceeds.
There was a fund price on the screen. Whether the till will have the money to pay it is unclear.
The number that matters to investors is what the funds’ assets can really be turned into cash for. We started with 830 billion. How much value the liquidation will produce, we don’t know.
/////
This week the file gained another layer.
On 25 September the regulator filed criminal complaints against eleven people over trading in Özata Denizcilik shares. On 28 September it named thirty-seven more over trading in Tera Finansal Yatırımlar Holding. These are criminal complaints, not penalties. A court will decide.
Both notices carry the same footnote. It cites Article 107 of the Capital Markets Law. Anyone who pays twice the gain, and at least half a million lira, within 15 days qualifies for leniency. The payment goes to the Treasury and Finance Ministry’s account.
According to press reports, someone not on either list has also paid the Treasury 2.2 billion lira. That’s said to be the proceeds from selling Özata shares. I won’t comment on the legal consequences. I’m not attributing motives either. We haven’t seen the receipt, anyway.
On 30 September Justice Minister Akın Gürlek announced a fifth wave of operations. The number of suspects has reached 217. Trading in 26 stocks is under investigation. According to the minister, assets found to be proceeds of crime will be moved into a new fund to be set up within TMSF.
For the first time, money is being directed somewhere other than the Treasury. A separate general share return account has also been opened in TMSF’s name. It’s for those who made excessive profits trading listed shares.
So there are now three addresses. Leniency payments go to the Treasury. Voluntary returns go to the victims’ fund. Proceeds of crime go to the new fund at TMSF. Whether the money paid to the Treasury will ever reach the victims still isn’t written anywhere.
/////
There are plenty of open questions.
When did the default really begin? How long had the ball been passed around?
When the shallow stocks were sold at the top, who was buying? It must be on the record. It hasn’t been disclosed.
Early on, we kept hearing that this was a liquidity crisis and that everyone would get their money. Over time that claim looked less and less realistic. Some money market funds may well pay out. For some equity funds, pessimism now seems warranted.
The 29 September statement tied the order between funds to liquidity. The 30 September decision gave the first step to the money market funds.
Here’s my reading of these decisions. The money market fund is seen as a strategic instrument, and the state wants to protect it. I think it’s reasonable to expect principal to be repaid in these funds. If collections go well, the full recorded claim may be paid too. That depends on the rest of the portfolio, above all the collateral behind the repo receivables.
The other funds are a mess. Funds holding each other’s shares and posting collateral to each other are now hopelessly tangled. Selling one fund’s assets melts another’s collateral. That knot won’t come undone until gains are recovered from the winners, by consent or by force. I expect recoveries there to stay low.
Nobody knows how long this will take. The Madoff liquidation has run for over fifteen years. I wouldn’t be surprised if ours lasts until the 2028 elections.
The interim payment is the first layer. How will the rest of the expectations be met?
The call to those who did “well” out of these funds now has an address. Whether they’ll go there is another question.
What will forced recovery actually bring in?
That’s Hilmi Abi’s reading. When what we know changes, so will what we think.