Terra and Pusula fund collapse triggers Turkish market crash and arrests

A fund ecosystem in Turkey collapsed in September 2026, centered on Terra and Pusula. Terra's stock rose 40,000% from 2022 to the crash, and its flagship fund gained 1,500% in 2025. Terra's debt surged from 132 million Turkish Lira at the end of 2024 to 59.8 billion Turkish Lira at the end of 2025, secured by illiquid stocks. The structure involved a money market fund lending 57% of its assets at 57% interest against these stocks, while only 13.8% went to government bonds. Regulatory changes in late August 2026 limited hedge fund holdings in low-float stocks to 2-8% of the free float. This forced sales; for example, Terra held 85.9% of the free float of a company with a 21% free float, far exceeding the 16% limit. Between August 31 and September 16, 2026, investors attempted to withdraw $4.7 billion. On September 16, Terra disclosed a default in a money market fund affecting $7.5 billion. On September 17, 131 funds representing 7.7% of Turkey's total portfolio volume were frozen and liquidated. The Turkish Central Bank provided relief measures including repo financing. At least 85 people were arrested, and an AKP vice-chair resigned after reportedly earning $44 million from pre-crisis investments. Retail investors with holdings under 1 million Turkish Lira are prioritized for repayment.