Crackdown or Capital Grab? Turkey State Fund Controls 1,000 businesses

A state fund has become one of Turkey’s largest business holdings after an anti-corruption drive transferred hundreds of private companies into government hands, raising concerns of a politically-motivated asset grab.

The corporate investigations and raids have rattled leading business figures and spawned multiple theories as to why they are happening — not least because President Recep Tayyip Erdoğan’s ruling Justice and Development party has previously used the State Deposit Guarantee Fund (TMSF) to seize the assets of its political opponents.

“The AKP has long used the TMSF both as a tool to regulate the economy and to channel resources towards companies close to itself, while sidelining those it views as rivals,” said Berk Esen, assistant professor of political science at Istanbul’s Sabancı University.

The government may now be “trying to reshape who controls the economy, to reconfigure Turkey’s corporate structure”, Esen added.

The Can Holding conglomerate, glassmaker and soda ash producer Ciner Group and Istanbul Gold Refinery are among the latest companies caught up in the probes, which have sharply increased the number of businesses held by the TMSF in just 12 months.

The TMSF, which acts as trustee for companies while they are investigated, currently controls 1,056 confiscated businesses, compared with 675 a year ago, according to TMSF figures. The businesses span the full range of Turkey’s economy, from media, finance and energy to the Kasımpaşa football club — Erdoğan’s boyhood team.

The probes and accompanying arrests have unsettled Turkey’s private sector by raising fears about the security of property rights and selective application of the law by courts. That is especially so as Erdoğan is believed to be seeking to extend his hold over Turkey for another presidential term after more than two decades of increasingly autocratic rule.

Turkish businesses are already under pressure from a struggling economy, and the chilling effect of a crackdown on the country’s largest opposition party, which began in March with the arrest of Istanbul mayor Ekrem İmamoğlu on corruption charges. Critics say the charges are politically motivated.

The simplest explanation for the probes and asset seizures, analysts and business leaders say, is that the government wants to boost its standing among voters by showing it is tough on all kinds of corruption. Its aim is to demonstrate that Turkey’s courts are independent and that prosecutors are not singling out the opposition for legal action.

Buttressing this theory is the high-profile detention last week of 19 media celebrities suspected of drug use, which some analysts described as “crackdown theatre”, designed to show the government’s resolve to cleanse society of criminality.

The music and television stars were released after drug tests and, to date, no charges have been filed. They included Hadise Açıkgöz, Demet Evgar Babatas and Berrak Tüzünataç.

A darker possibility, analysts said, is that Turkey’s struggling economy has increased the need for Erdoğan’s ruling party to fund patronage networks ahead of the next presidential elections, scheduled for 2028.

“The unspoken fear of the business community . . . is that the probes are not a ‘clean hands’ operation . . . but a full frontal attack on the corporate sector,” said Atilla Yesilada, an Istanbul-based analyst at the consultancy GlobalSource Partners.

The worry is that Erdoğan’s goal is “to route funds either directly to the Treasury via TMSF, or to reshuffle capital from bosses to loyal hands”, Yesilada added. “I am truly frightened to suggest that these busts could continue for years to feed the regime.”

Originally set up in 1983 to protect Turkish bank deposits, the TMSF was given an expanded role after a failed coup attempt against Erdoğan in 2016 that led to a wave of arrests and the purge of tens of thousands of public servants. More than 1,300 companies suspected of being linked to the plot, which Ankara blamed on the late preacher Fethullah Gülen and his followers, were confiscated. The fund was tasked with selling the companies or liquidating their assets.

According to the TMSF, more than 600 of these companies were eventually returned to their original owners following judicial investigations. The rest were sold — sometimes, critics allege, to government allies at favorable prices.

New regulations passed in February strengthened the TMSF’s legal framework, with “strong suspicion” of crimes such as money laundering sufficient for a court to order a company to be placed under TMSF trusteeship.

One of the first large companies seized after the new legislation was fintech unicorn Papara, which prosecutors alleged in May was used as a conduit for illegal gambling and betting.

In the indictment released last week, prosecutors asked the court to consider a 28-year jail sentence for Ahmed Faruk Karslı, founder of the electronic payments company, which has been valued at more than $1bn.

The latest spate of corporate raids began on September 11 when prosecutors ordered the seizure of 121 companies belonging to Can Holding, an owner of major media outlets and schools that began in the tobacco business.

Detention orders were issued for 10 people, including the group’s principal owner Kemal Can, on charges of smuggling, money laundering and tax evasion, based on findings by Turkey’s financial intelligence unit, MASAK.

Among the assets seized was one of the country’s last independent broadcasters, Haberturk Media, which owns news station Haberturk and Bloomberg HT TV that operates in Turkey under a licensing agreement with Bloomberg.

Three weeks later, on September 29, the probe unexpectedly expanded when some of the Turkish assets held by conglomerate Ciner Group were also confiscated on allegations of fraud linked to its sale of Haberturk Media to Can Holding late last year.

Prosecutors said they had “strong suspicions” that the deal was part of money-laundering activities, even though regulators had cleared the transaction only months before. Furthermore Kemal Can said in leaked testimony to the prosecutor’s office that he had carried out the media deal based on “the council of senior government officials”.

Ciner Group, which also owns UK-incorporated WE Soda, one of the world’s largest producers of soda ash, a key raw material used in industrial processes such as glass manufacturing, declined to comment. WE Soda is not implicated in the investigation.

Representatives of Can Holding were not available for comment. The TMSF did not respond to requests for comment.

In the latest anti-corruption raid, Turkish police last week detained 21 people linked to Istanbul Gold Refinery, on charges of alleged fraud. IGR, which is among Turkey’s five biggest industrial companies, did not respond to requests for comment. The London Bullion Market Association said last week it had initiated an “incident review process” and had requested a formal statement from IGR.

“Nobody seems to know what is going on, but the corruption crackdown raises many issues,” said Wolfango Piccoli of Teneo, a consultancy.

Among them, he said, is the quality of Turkey’s regulators, given that they cleared the Can media deal only for it to be investigated by prosecutors soon after. Another issue is the independence of TMSF trustees, given that they control assets that were valued by the fund at TL328bn ($10bn) at the start of this year.

Whatever the reasons behind the clampdown, the mere fact it has happened gives a signal.

“If I had to speculate, it’s about Erdoğan sending a message,” Piccoli said. “There are no untouchables.”