Istanbul feels a long way from Wall Street. For investors used to focusing on the US, it’s easy to dismiss the travails of emerging markets: they might provide a few colourful stories to read about, but don’t hold much relevance for the day-to-day job. An ongoing stock market scandal in Turkey, however, has more parallels with developed markets than observers might care to admit.

Turkey’s benchmark Bist 100 index tumbled more than 8 per cent this week, in a sell-off triggered when a local fund manager said some of its funds could not meet customer redemption requests. Several large asset managers have been accused of manipulating markets by buying illiquid shares in related companies, which inflated their funds’ net asset values and attracted further inflows from retail investors drawn by their apparently miraculous returns. Through this narrow lens, it looks, in the words of one investor, like a classic “1990s-style emerging-equity market crisis”, driven by lax oversight and what authorities are now calling a “Ponzi-like scheme”.

But it would be naive, or condescending, to assume larger markets don’t share similar characteristics. Bad actors can turn up anywhere. Bill Hwang’s Archegos used borrowed funds to make highly concentrated bets on a handful of US and Asian media and technology stocks. As in the Turkish case, he had a fairly simple way to drive up his fund’s net asset value, but no obvious way to crystallise the gains without prompting a sell-off.

Yet it doesn’t take a fraud to cause problems when markets get overstretched. Turkish stocks have been on a storming run over the past few years, driven in part by retail traders seeking refuge from runaway inflation. Alongside various central bank measures to support the financial system, the capital markets regulator eased collateral requirements so that investors with leveraged bets were less likely to receive margin calls from brokers that forced them to make further sales.

That scenario would be familiar to Leopold Aschenbrenner, the founder of the Situational Awareness hedge fund that suffered steep losses this summer from his debt-fuelled bets on AI-linked stocks. The US market has been helped to record highs by enthusiastic retail traders and increased leverage — outstanding US margin debt was $1.5tn as of the end of August, a little below the high hit in June. There are also worries about criss-cross investments and circular financing agreements in the tech sector.

Meanwhile, regulators in Washington and Ankara alike have been accused of prioritising capital market growth over investor protections. Turkey’s financial stability now sits in the hands of Mehmet Şimşek, a financier-turned-minister who investors have seen as a voice of economic reason in an administration given to odd macroeconomic policies. US Treasury secretary Scott Bessent can no doubt relate.