Turkey began rounding up suspects in an investigation into alleged stock market fraud that led to a plunge in equities last month, according to state media.
Istanbul’s chief prosecutor started the probe on suspicion of organized activity that violated Turkey’s capital markets law and issued a detention warrant for 10 people, two of whom remain at large, state news agency Anadolu said on Sunday.
The arrests come after a sudden reversal in Turkey’s stock market, where banking equities dropped 39 percent in a three-week long rout that started on September 13 and was beginning to threaten some brokerages’ financial stability.
The market mayhem drew ire from main opposition leader Kemal Kilicdaroglu, who said the selloff suggested massive “stock manipulation” and urged regulators to “wipe out manipulators.”
In an interview last week, President Recep Tayyip Erdogan predicted “speculative moves” during the rout and said the Treasury and Finance Ministry was “reviewing transactions as part of a probe.”
The rout, which erased about $14 billion in market value, followed an unprecedented runup in stock prices, during which the Borsa Istanbul Banks Index surged about 150 percent between mid-July and its peak on September 12. That was accompanied by increased levels of trading in futures and leveraged markets.
The steps being taken now mark the most dramatic move by Turkish authorities to try to limit the political fallout. Last week, Turkey’s regulator asked local brokerages to help curb stock volatility, while custodian bank Takasbank took over some shares in three companies as collateral while providing liquidity to brokerages, according to an exchange filing.
Turkish bank stocks have been underpinned by local investors’ search for hedges as inflation has climbed past 80 percent this year. However, the magnitude of the rally left many analysts and investors confounded. Gains among banks were led by Sekerbank, TSKB and Vakifbank, which rose 370 percent, 303 percent, and 251 percent respectively.
Authorities have started reviewing transactions in the market for the past 12 months and agree that some moves during the two-month rally were disruptive, a senior official told Bloomberg last month.