There’s an outrageous investment fund scandal happening in Türkiye right now. I’ll try to explain it briefly.
First, some people create a private investment fund that isn’t open to the public, so we still don’t know who its investors are.
The fund approaches companies that are about to go public and says, “Let us handle your IPO.”
They buy up most of these companies’ shares through their own funds. Then they keep trading the shares between their two funds to push the prices up and make the companies look much more valuable than they are.
They sell some of the inflated shares to other players to bring money in from the market. But they can’t sell too many, because they need to keep most of the shares to continue the manipulation.
Then they offer the private investment fund to the public. In an ideal system, regulators would spot the manipulation and stop the fund from being offered to the public, but they don’t care. The fund opens to the public, and outside money starts flowing in. They use that money to keep inflating the share prices.
That’s when the second part of the scheme begins. The same investment fund players set up a money market fund. The investment fund has a risk level of 7%, while the money market fund’s is 2%, so more people choose the money market fund. These scammers keep its returns higher than those of other money market funds, attracting even more investors. After all, it’s seen as a low-risk investment.
Cash from outside investors starts building up in the money market fund. Money market funds can also lend money. So the investment fund (the one inflating those shitty shares) goes to the money market fund run by the same people and asks for a loan through a reverse repo deal.
For the money market fund to lend the money, it needs collateral. The investment fund offers those inflated, worthless shares as collateral. And just like that, money is transferred from the money market fund to the investment fund in a way that looks completely legal.
Then the people who set up the original fund cash out their shares and walk away. The bubble bursts. They’ve created value that wasn’t really there and taken money from the market.
This chain of events causes the stock market to crash overnight and wipes out ordinary people’s investments.
First, some people create a private investment fund that isn’t open to the public, so we still don’t know who its investors are.
The fund approaches companies that are about to go public and says, “Let us handle your IPO.”
They buy up most of these companies’ shares through their own funds. Then they keep trading the shares between their two funds to push the prices up and make the companies look much more valuable than they are.
They sell some of the inflated shares to other players to bring money in from the market. But they can’t sell too many, because they need to keep most of the shares to continue the manipulation.
Then they offer the private investment fund to the public. In an ideal system, regulators would spot the manipulation and stop the fund from being offered to the public, but they don’t care. The fund opens to the public, and outside money starts flowing in. They use that money to keep inflating the share prices.
That’s when the second part of the scheme begins. The same investment fund players set up a money market fund. The investment fund has a risk level of 7%, while the money market fund’s is 2%, so more people choose the money market fund. These scammers keep its returns higher than those of other money market funds, attracting even more investors. After all, it’s seen as a low-risk investment.
Cash from outside investors starts building up in the money market fund. Money market funds can also lend money. So the investment fund (the one inflating those shitty shares) goes to the money market fund run by the same people and asks for a loan through a reverse repo deal.
For the money market fund to lend the money, it needs collateral. The investment fund offers those inflated, worthless shares as collateral. And just like that, money is transferred from the money market fund to the investment fund in a way that looks completely legal.
Then the people who set up the original fund cash out their shares and walk away. The bubble bursts. They’ve created value that wasn’t really there and taken money from the market.
This chain of events causes the stock market to crash overnight and wipes out ordinary people’s investments.
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