Istanbul Stock Exchange chief resigns ahead of Halkbank retrial

Istanbul Stock Exchange CEO Mehmet Hakan Atilla resigned from his post of his own accord on Monday, according to a statement issued through the state-run Anadolu news agency. "At his own request," his resignation was accepted by the board of directors and notified to the Turkish Capital Market Board, the statement concluded. 

Atilla was arrested in March 2017 at New York airport during a business trip. The then deputy CEO of Turkish bank Halkbank was convicted of fraud and conspiracy offences against the US for being part of an organisation dedicated to supporting Iran in evading sanctions. However, the banker was acquitted of money laundering, resulting in a sentence of 2 years and 8 months in prison.

Prosecutors in the Southern District of New York said that from 2012 to 2016, Halkbank and its executives had used shell companies in Iran, Turkey and the UAE to conduct illicit transactions to Iranian-owned funds within the bank. All this was done to circumvent sanctions against the Tehran regime. In return, Turkey would have received Iranian oil and natural gas at an affordable price. 

Meanwhile, Turkish and Iranian officials allegedly enriched themselves with tens of millions of dollars to protect those involved, according to prosecutors. Assistant Attorney General for National Security John C. Demers called the case "one of the most serious violations of sanctions against Iran that we have seen". 

In the words of the banker's defence lawyer, Victor Rocco, Atilla was nothing more than "a blameless pawn, collateral damage". However, the most revealing factor of the trial was the testimony of Turkish-Iranian gold trader Reza Zarrab, famous in Turkey for being married to Turkish singer and actress Ebru Gündeş and running the scheme. 

Zarrab pleaded guilty and agreed to testify. In a first statement, he admitted to paying more than $60 million in bribes. According to his testimony, in 2012 he paid Turkey's then Finance Minister Zafer Çaglayan a small fortune to help him hide the money transfers by passing them off as gold purchases. 

Zarrab claimed during the trial that the Turkish president himself was aware of the scheme. Atilla, meanwhile, was released from prison in 2019 and returned to Turkey at the end of his sentence. There, he was welcomed by the top government officials as a thank you for not having revealed the Turkish government's involvement in the plot.

In October of the same year, the banker was appointed director general of the Istanbul Stock Exchange by the then finance minister and Erdogan's son-in-law, Berat Albayrak, a position he has held until now.

The US authorities will reopen the trial against Halkbank to clarify the extent of the bank's involvement in the scheme. The bank is charged with fraud, money laundering and sanctions offences. In a worst-case scenario, the bank could face a fine in excess of $20 billion or even debarment from the SWIFT international banking system. Such a decision would disqualify one of Turkey's most important banks, and further deepen the economic crisis facing the country. 

The trial was originally scheduled for 1 March, but an appeals court granted a temporary stay to allow a panel of judges to hear Halkbank's claims. For the time being, it is necessary to determine whether a New York court has jurisdiction over a Turkish financial institution. However, experts believe that this is a mere formality and that the process will continue.

With the Turkish economy in crisis, Halkbank's bankruptcy would likely be a blow to Turkey's recovery aspirations. In recent weeks, moreover, Turkey has been one of the economies hardest hit by rising oil prices. The Turkish lira fell to its lowest point since late December, meaning that thousands of investors could lose their savings. 

Economists warn that the entire Turkish financial sector could collapse, as it did in 2001. For this reason, Atilla's forced resignation may have been one of Ankara's last resorts to maintain cordial relations with Washington, even more so after the US reprobation of Turkey over the purchase of Russian-made S-400 missiles.

Erdogan had already tried to stop the trial during Obama's term in office, and maintained a line of communication with then Vice President Biden, but it was not until Trump's arrival in the White House that progress was made. A few weeks after the Republican's inauguration, his adviser and lawyer Rudy Giuliani flew to Ankara to discuss the Halkbank case with Erdogan, and months later Trump himself fired Preet Bharara, the U.S. Attorney for the Southern District of New York who had led the prosecution.

The Turkish president cannot be punished by the US because of his inviolability as head of state, but the consequences of the illegal sanctions practices have damaged the image of both Turkey and its publicly owned bank. All this, moreover, at a delicate time for the Ottoman economy. The plot seems to confirm all the accusations against Erdogan from the Turkish opposition and the international community.