Under President Recep Tayyip Erdogan, cronyism and financial wrongdoing are increasingly immune from accountability.

“Give the Great Sahara Desert to the political Islamists, and in five years they’ll start facing a sand shortage.” This is one example of the emerging public anger and ridicule in Turkish public opinion as citizens respond to one of the country’s largest ongoing Ponzi schemes.

In April, Bloomberg published an investigation into the extraordinary surge in the stock of Turkish brokerage firm Tera Yatirim, which increased by 40,000 percent. The following week, nearly half a million investors lost about $18 billion in one of Turkey’s largest investment fund scandals, representing nearly 10 percent of the country’s investment fund market.

This outcome is not unexpected, as a report published earlier this year by the Council of Europe’s Group of States against Corruption (GRECO) found that Turkey had implemented safeguards against corruption in only four of the 32 objectives set four years earlier. Notably, objectives addressing corruption at the highest executive levels remained entirely unaddressed. This is not an isolated incident; it reflects broader governance failures in Turkey, following a decade of democratic backsliding under centralized rule.

Finance Minister Mehmet Simsek acknowledged in November 2025 that “manipulations are being carried out particularly through certain funds.” Despite this admission, regulators did not act until August 2026, a ten-month delay. Turkish authorities intervened only after the American financial index company MSCI warned international investors about coordinated trading in June.

The delays in regulatory intervention cannot be attributed solely to negligence; instead, they indicate entrenched corruption within the administration of Turkish President Recep Tayyip Erdogan. The extent of systemic compromise remains unclear. In April, police detained a former deputy chair of Turkey’s Financial Crimes Investigation Board (MASAK) for investigating the brokerage.

This action was part of a broader strategy by the brokerage to silence critics through threats of legal action against journalists and social media users. Emre Tezmen, chairman of Tera Group and a principal figure allegedly involved in the “Ponzi-like” scheme, also held a senior position on the board of the Central Securities Depository of Turkey (MKK), an institution responsible for financial recordkeeping and securities transfer.

These events have revealed extensive connections among leaders of the ruling Justice and Development Party (AKP), market officials, and private industry, resulting in networks of cronyism and nepotism. Fatma Betul Sayan Kaya, Turkey’s former family minister, resigned as deputy head of the AKP after accusations that her investment in an affected fund let her accumulate millions before the market collapse. Her disputed trades include shares in Ozata Denizcilik, a shipbuilder with contracts for the Turkish Navy that also maintains links to banking regulators and the finance ministry. Other individuals implicated in the scandal include Iskender Balci, Emre Alkin, Muhammed Yariz, and Fecir Alptekin, all of whom have familial and personal ties to the AKP.

These developments illustrate the consequences of highly centralized governance. In 2017, the Council of Europe’s Venice Commission warned that Erdogan’s proposed executive presidency would eliminate checks and balances, giving one person the authority to appoint and dismiss senior officials at will. Subsequently, Erdogan appointed himself chairman of the sovereign wealth fund, named his son-in-law as treasury and finance minister, and dismissed three central bank governors after disagreements over interest rates. 

Regulatory positions have increasingly served as rewards for loyalists and their families. For example, Balci, who was detained in the Ozata investigation, is the son of a former member of the banking regulator that approved Tera’s sister bank and the son-in-law of a deputy finance minister. When executive power is so concentrated, the central question is not whether the presidency was aware, but why it chose not to act.

Erdogan is not a passive observer; corruption extends to the highest levels of government. In 2013, a corruption inquiry implicated his cabinet and resulted in the resignation of three ministers. Erdogan described the investigation as a Gülenist “judicial coup.” Instead of accepting accountability, he dismantled the oversight system: police officers and prosecutors involved in the case were replaced, their successors terminated the investigation, and after the 2016 coup attempt, more than 4,000 judges and prosecutors were dismissed. 

These allegations later resurfaced under oath in a US federal court, where gold trader Reza Zarrab admitted to bribing Erdogan’s economy minister and testified that Erdogan had approved involving two additional Turkish banks in a scheme to circumvent US sanctions on Iran. Erdogan, who denies any wrongdoing, has never faced charges. Justice Minister Akin Gurlek, promoted in February after leading the suppression of the opposition and the imprisonment of Istanbul Mayor Ekrem Imamoglu, now oversees the fund investigation. His prosecutors are unlikely to pursue the investigation to the highest levels.

Turkey has previously experienced significant periods of corruption; the AKP initially rose to power in 2002 with promises to end the dishonesty of the 1990s. What distinguishes Erdogan’s Islamist leadership is not the theft itself, but how it rationalizes it. Erdogan cited Islam’s prohibition on usury to justify cutting interest rates as the lira depreciated, a policy that fueled inflation and later drove nearly half a million investors to seek high returns in these funds. When confronted with controversy, he offered forgiveness rather than reform, asserting that the AKP is “a clean party, just as its name suggests” (ak means “white” or “clean ”). Under his leadership, elite members appropriated national wealth, treating it as a deserved reward for the virtuous.

This situation extends beyond corruption; it reflects widespread societal deterioration resulting from the absence of democratic governance, including the separation of powers, an independent judiciary, and judicial oversight. These are fundamental principles of accountability that Erdogan has systematically undermined for over a decade. Policymakers in Washington and Brussels, and the foreign investors Finance Minister Simsek seeks to attract, should recognize that stricter fund regulations cannot replace the rule of law. Until Turkish citizens regain the ability to hold their leaders accountable through courts and elections, further scandals are inevitable.

About the Authors: Sinan Ciddi and Isabella Bournas

Sinan Ciddi is a senior fellow on Turkey at the Foundation for Defense of Democracies (FDD) in Washington, DC. Sinan has over two decades of research experience focused on Turkish domestic politics and foreign policy, with bylines in Foreign Policy, Foreign Affairs, Politico, Newsweek, The National Interest, and 19FortyFive. Sinan is also an associate professor of national security studies at Marine Corps University and an adjunct professor at Georgetown University’s School of Foreign Service.

Isabella Bournas is an intern at the Foundation for Defense of Democracies. She is a master’s candidate at Georgetown University’s Edmund A. Walsh School of Foreign Service and a graduate of McGill University, where she studied Political Science and Psychology.

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