In a grim and mysterious turn in Turkey’s ‘Ponzi-style’ funds scandal and its links to government figures, the chairman of a distressed debt management firm has been found shot dead in his vehicle on the outskirts of Istanbul.

The sudden death of Ali Emre Balli, chairman of Adil Varlik, has met with an eerie silence since it was announced on October 6. Adil Varlik is 100%-owned by Mustafa Yazici, a son of Hayati Yazici, who serves as deputy chairman at President Recep Tayyip Erdogan’s ruling Justice and Development Party (AKP).

Prosecutors in Istanbul said that Balli was found dead three days ago at around 15:40 local time in the driver’s seat of his car, parked in a vacant lot in Cekmekoy district. While investigators are currently treating the incident as a suspected suicide pending forensic analysis, the timing of his death has deepened suspicion over what took place exactly.

Failed to execute

The tragedy coincided with a formal notification from Turkey’s central securities depository (MKK) confirming that Adil Varlik had failed to execute principal and coupon payments due on October 6 in relation to its TRFADLVE2612 commercial paper. Issued in April to qualified investors at a 47% simple interest rate, the 180-day instrument required a principal repayment of Turkish lira (TRY) 500mn (around $10mn), alongside TRY 116m in accrued interest.

In a statement to investors, Adil Varlik attributed the non-payment to unspecified “extraordinary circumstances,” but offered no elaboration.

The bond issue was syndicated by Tera Yatirim (Istanbul/TERA), the brokerage house at the centre of Turkey’s widening capital markets scandal. As elements of the affair have unravelled, there have been rumours of leaks targeted against AKP heavyweights. One such leak came ahead of the high-profile resignation of another AKP deputy chairman, namely Fatma Betul Sayan Kaya.

Asset freeze, then reverse gear

Both Balli and Mustafa Yazici were named on September 30 in a 30-person asset-freeze order issued by the Istanbul chief public prosecutor’s office in connection with the fund scandal. However, in a move that drew swift criticism from opposition figures, financial restrictions against Balli, Yazici and three other individuals along with some others were abruptly lifted just hours later.

Zeynel Emre, spokesman for the main opposition party, New Party (YP), subsequently alleged that Balli had overseen transactions totalling nearly TRY 9bn linked to disputed investment funds while Mustafa Yazici had conducted TRY 600mn in personal trades. Prosecutors have not publicly verified those figures.

Government busy seizing companies

With the scandal continuing to unfold, the government has moved to seize linked companies. On October 8, Destek Finans Faktoring (DSTKF) said that Turkey’s deposit savings fund TMSF had taken over its management.

Previously, banking watchdog BDDK said on September 30 that TMSF had been appointed trustee at Destek Yatirim Bankasi, Hedef Yatirim Bankasi, Tera Yatirim Bankasi, DSTKF and Tera Finans Faktoring.