Seoul Gazette - Turkey ex-minister resigns as investment fund crisis grows

The late-night post on X came after days of growing speculation about Betul Sayan Kaya's alleged links to the scandal, which erupted earlier this month and triggered concerns about liquidity in parts of the investment-fund sector.

Regulators moved in quickly to address the crisis, placing into liquidation seven companies managing 131 investment funds with assets reportedly worth around $17 billion.

"I have submitted my request to our party chairman to be excused from all positions and responsibilities I currently hold," she wrote.

"I believe it's necessary to take political responsibility to ensure the office I hold doesn't become the subject of public debate and that investigation can be conducted independently, impartially, and without any suspicion or undue influence."

It was not immediately clear whether her resignation was accepted.

On Saturday, the main opposition Yeni Parti (New Party) sought clarification over claims Kaya had made a stock market investment of 63 million lira ($1.3 million) that generated around 1.3 billion lira in proceeds.

Kaya, an AKP deputy chair who served as family minister from 2016 to 2018, and her husband allegedly offloaded shares before news of the scandal broke.

"Clearly, there's a big political dimension here. Some of the investors in these funds or the owners of the funds were politically connected," an unnamed investor told AFP.

"And people have been asking for action, wondering why they didn't move earlier."

Economist Timothy Ash said the episode highlighted shortcomings in Turkey's regulatory framework.

"There needs to be a complete, full investigation. We need to know what went wrong, who was responsible, people who are responsible, held to account, and reforms enacted," he told AFP.

- 'Without compromise'-

AKP spokesman Omer Celik said the fight against all forms of wrongdoing would be carried out "without compromise".

"If there is an allegation, it will be investigated. All irregularities will be brought to light. Those who have committed wrongdoing will be held accountable before the law," he promised on X.

Turkish media reported that the number of arrests in connection with the scandal has risen to 51 including a former deputy governor of Turkey's central bank.

The crisis emerged in early September after Turkey's Capital Markets Board (SPK) changed its guidelines for investment funds, saying they could no longer invest all their assets in one stock but were required to diversify.

The move sought to address concerns that many funds were heavily investing in a small number of obscure or hard-to-sell stocks.

To comply, some funds began selling holdings, spooking investors who started trying to cash in their investments.

But a scandal erupted last week when several companies admitted they were unable to satisfy investor redemption demands, sending Istanbul's main stock exchange tumbling.

A day later, all 131 investment funds were placed into liquidation by the SPK, which said more than 455,000 individual investors were affected.

The crisis has fuelled speculation that Finance Minister Mehmet Simsek was preparing to resign, though he dismissed the rumours as "baseless".

Speaking to Turkish journalists on the sidelines of the UN General Assembly meetings in New York this week, Erdogan downplayed the risks posed by the fund crisis to the Turkish economy.

"There is no risk to either our financial system or the Turkish economy," he said.

"All necessary steps are being taken within the framework of capital market regulations and the law. Whoever is responsible will be held accountable before the law."

U.Moon--SG