Turkish dismay
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What is the Turkish pump‑and‑dump scandal and how did it start?
Nothing teaches us more about how markets really work than a market scandal. And in Turkey, they have an absolute banger going in a market and an economy that is already under pressure. Today on the show, how do you say pump and dump in Turkish? This is Unhedged, the Finance and Markets podcast from the Financial Times, and I am Rob Armstrong, coming to you from the CLAMI FT Studios in New York, New York. Joining me today is one of my favorite colleagues, JP Rathbone, who has either worked on or led, I think, every foreign desk the FT operates. Am I exaggerating, JP?
Let's just leave it that exaggeration and enjoy it.
No, but really you've run Africa, Latin America, now you're in Turkey. You're basically the British Empire. You have most of the surface of the planet covered, I would say.
No, no, it was Latin America. That's where I cut my teeth. Not Africa.
Oh, not Africa. Okay. Well, just walk me through this very colorful scandal in the Turkish stock market.
Yes, of course. So the envelope to understand the stories is a classic pump and dump scheme run by spivs. And you go back about two years and there are two
I have to stop you on behalf of our American listeners. Spiv. Give me a working definition of the word spiv, JP.
A guy who opens his coat and says, I got a whole load of watches, do you want one?
Okay. So we have a pump and dump run by Spivs.
How did the spivs‑run funds Terror and Pusula generate triple‑digit returns?
Go on.
So go back about two years and there are two main investment funds in this sorry tale. One is called Terror and the other is called Pussula. And they establish closed-end funds with limited subscribers and they start their magic, which basically involves Buying each other's shares and coordinating to buy the shares of other small liquid companies. And when you get concentrated buying, share price zooms up. their own net asset value increases and what a wonderful performance that is. Retail investors jump on board thinking, Woohoo, this is amazing. And we're talking like Forty three thousand percent returns over three years. The bubble pops all of a sudden and everyone is thinking, Whoa, where did this come from?
Why did it happen? Who is responsible? Who can we blame? And how can I get my money back? And that in a nutshell is what's happened.
Yeah. It sounds very familiar. It it slight echoes of Bernie Madoff here in the United States, a fund product where the return seemed almost too good to be true and turned out to be too good to be true. But in this case the performance numbers we're talking about really sound too good to be true, hundreds of percent returns. Didn't this look too fantastical to be real from the outset?
Yeah, absolutely. Which is why everyone in the business knew it was too fantastical to be real.
Why did the scheme collapse and who was blamed for the fallout?
But if you're in a if you're just a a punter in an economy such as Turkey and there's been very high inflation for the past three, four years, I mean we're talking It's down to thirty percent at the moment and that's viewed as a triumph. So there's lots of instability. Plus you've got a macroeconomy in the dumps, your pay packet is being eroded by inflation, and you're desperate to make ends meet. If you're a small guy or small woman You get, Oh my God, six hundred percent return, that'll solve my rental bill, all my school fees, or whatever it is. So that's the kind of money that I understand has gone into this because what's noteworthy about this, although it's all been all over the press last week, the kind of detail that you'd expect to see in
reporting in most countries is sort of absent here.
Hm. I'm really struck by the open secret aspect of this, Jean Paul. I mean just reading your reporting Back in June, we had a warning from MSCI talking about recurring instances of possible coordinated trading behavior, which turns out to be what happened. We had the Minister of Finance saying last November that the government knew manipulation was taking place and was talking about regulating things. And, you know, last week, the justice minister said criminal market manipulation. should not go unanswered. So how can it be that officials and you know big names in markets are saying this stinks?
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Chapters
8 chapters
1
What is the Turkish pump‑and‑dump scandal and how did it start?
0:00–1:44
2
How did the spivs‑run funds Terror and Pusula generate triple‑digit returns?
1:44–3:16
3
Why did the scheme collapse and who was blamed for the fallout?
3:16–5:51
4
What role did Turkish regulators and the justice minister play in exposing the fraud?
5:51–8:04
5
How are investors being reimbursed and what is the expected recovery rate?
8:04–10:31
6
What does the scandal reveal about Turkey’s broader financial market structure?
10:31–13:00
7
How does the carry‑trade and high‑yield environment affect foreign investors now?
13:00–15:19
8
Why is Rob shorting the US 10‑year Treasury and what’s his outlook?
15:19–17:18