“Life Instinct” or Insider Trading?


Quaestor President-CEO Csaba Tarsoly (left) and External Economy and Foreign Affairs Minister Péter Szijjártó officially open the Moscow Hungarian Trade House in April 2013 (photo: MTI).

On March 9, 2015, the External Economy and Foreign Affairs Ministry-operated Hungarian National Trade House (Magyar Nemzeti Kereskedőház) withdrew 3.8 billion forints in government bonds from Quaestor Securities just hours before the securities unit of the Budapest-based brokerage announced that it had initiated bankruptcy procedures against itself (sources A and B in Hungarian).

The Quaestor unit attributed its bankruptcy to an unmanageable spike in demand from its clients to redeem securities from the company following the Hungarian National Bank’s partial suspension of the operational licenses of the Buda-Cash Brokerage on February 24 and of Hungária Securities on March 6 on suspicion of fraud (sources A, B and C in Hungarian).

However, on March 10 the Hungarian National Bank announced that it had partially suspended the operational license of Quaestor Securities on suspicion of securities fraud as well (source in Hungarian).

On March 24, officials from the External Economy and Foreign Affairs Ministry stated that the decision to remove the Hungarian National Trade House’s government bonds from Quaestor Securities occurred on March 5, four days before the brokerage’s securities unit announced its bankruptcy, but that “the transit time and settlement of such a process can require a few days.” Ministry officials asserted that “the directors of HNTH [Hungarian National Trade House] observed money-market processes and saw that Buda-Cash and Hungária Securities went under, therefore they decided not to keep their money in brokerage companies in the future and correspondingly removed the capital from Quaestor” (source in Hungarian).

During a press conference on March 25, a journalist asked Prime Minister Viktor Orbán if “he didn’t consider it to be strange that the foreign ministry took its money out before the bankruptcy of Quaestor?” The prime minister responded (source in Hungarian):

No, I ordered it. When Buda-Cash went under and the money of many people, companies and institutions got stuck in it, at a cabinet meeting I asked all ministries to look if they have money at any brokerage company. And if so, then immediately remove the public money, because they will end up like the 67 local councils whose money got stuck.


Prime Minister Viktor Orbán announces that he ordered ministries to remove money from brokerages        (photo: MTI).

On March 26, Prime Ministry director János Lázár said that Orbán had issued the above order at a cabinet meeting at the beginning of the month based on a report on the stability of brokerages in Hungary that the prime minister had instructed the National Economy Ministry to prepare for the government following the partial suspension of Buda-Cash Brokerage’s operating license. Lázár said that “simple life instinct” had prompted Prime Minister Orbán to direct ministries to withdraw their money from brokerages (sources A and B in Hungarian).

Speaking alongside Lázár, Prime Ministry State Secretary in Charge of Government Communications András Giró-Szász said that “We were working only from public data. Quaestor security-holders also knew that Buda-Cash had gone bankrupt” (source in Hungarian).

However, journalists quickly discovered that the Orbán government had held no cabinet meetings between February 25 and March 11, two days after Quaestor announced its bankruptcy, thus contradicting Lázár’s assertion that the prime minister had ordered ministries to remove take their money from brokerages in early March.

On March 27, the pro-government state-run television station M1 reported that official minutes showed that Prime Minister Orbán had ordered ministries to remove their money from brokerages at a cabinet meeting on February 25 (source in Hungarian). 


Alarmed clients line up outside Quaestor office in Budapest after company’s securities unit announces bankruptcy (photo: hvg.hu).

Therefore if Prime Minister Orbán, as he stated, asked the National Economy Ministry to prepare a report on the stability of brokerages after the partial suspension of Buda-Cash Brokerage’s operating license on February 24, the ministry had one day to compile this report before the cabinet meeting of February 25.

On March 29, police arrested Quaestor Securities President-CEO Csaba Tarsoly on suspicion of securities fraud. Tarsoly had developed a close working-relationship with the Orbán government during the 2010–2014 parliamentary cycle. This relationship revolved around two axes: the government’s Eastern Opening policy and football.

Until the brokerage’s securities unit announced its bankruptcy, Quaestor Securities operated the Moscow Hungarian Trade House and the Istanbul Turkish-Hungarian Trade House, both of which opened in 2013. These trade houses are intended to promote business opportunities for Hungarian enterprises in Russia and Turkey, respectively, pursuant to the Eastern Opening policy.

Quaestor opened the Moscow Hungarian Trade House independently and the Turkish-Hungarian Trade House jointly with the External Economy and Foreign Affairs Ministry-operated Hungarian National Trade House (source in Hungarian).

Tarsoly was the director of both the Moscow and Istanbul trade houses until the Quaestor unit’s bankruptcy.

Quaestor also opened a “visa center” in Moscow in November 2014 in cooperation with the External Economy and Foreign Affairs Ministry. This center generates profit through the issue of visas valid for travel to Hungary—and thus to the other 25 European states that are part of the Schengen Area (source in Hungarian). 

Minister of External Economy and Foreign Affairs Péter Szijjártó furnished Quaestor President-CEO Tarsoly with a permanent entry-permit to the Hungarian Parliament Building in 2012 and a diplomatic passport in 2014 in order to facilitate the establishment and operation of the Moscow and Istanbul trade houses and the Moscow visa center (source in Hungarian).


Prime Minister Viktor Orbán (center) and team owner Csaba Tarsoly (left) attend Győr ETO FC football match (photo: Népszabadság).

Tarsoly also serves as president of the Hungarian football team Győri ETO FC, one of the top division-one clubs in Hungary. Prime Minister Orbán, a renowned football fan, attended Győri ETO FC matches, at least one in the company of Tarsoly (source in Hungarian). Tarsoly and Minister of External Economy and Foreign Affairs Péter Szijjártó first became acquainted in the early 2000s through their common interest in Győr football when the latter was the vice-president of the city’s sports committee (source in Hungarian).

Szijjártó and his young son took part in a kickoff ceremony at a Győr ETO FC match on June 1, 2014, five months after Tarsoly hired four players from the external economy and foreign affairs minister’s Dunakeszi Kinizsi Futsal team to serve in top management and coaching positions on his Győri ETO FC club (sources A, B and C in Hungarian).

On March 9, Tarsoly wrote a letter to Orbán notifying him of the impending Quaestor bankruptcy filing and asking the prime minister to arrange to have the government provide the company with a loan in order to temporarily finance business operations (source in Hungarian).

The prime minister did not comply with Tarsoly’s request for credit.

The National Assembly opposition has successfully initiated the establishment of a parliamentary examination-committee to investigate the Quaestor affair (source in Hungarian).


Tarsoly in police custody (photo: index.hu).

The opposition party Együtt has submitted a request to have the National Economy Ministry report upon which Orbán based his order for government ministries to remove their money from brokerages released on the grounds that it constitutes information of public interest (source in Hungarian).

The Orbán administration has been attempting to portray the Quaestor affair as an instance of Hungarian Socialist Party (HSP) corruption. Fidesz National Assembly caucus Chairman Antal Rogán has suggested that the party will establish a parliamentary subcommittee in order to investigate a 17-billion-forint loan that Quaestor received at the time of the HSP government of Prime Minister Ferenc Gyurcsány in order to finance construction of a new stadium for the Győri ETO FC football club and an adjacent shopping center (source in Hungarian).

In the likely event that Quaestor President-CEO Csaba Tarsoly is brought to trial for securities fraud, he could be compelled to provide testimony that might determine if any members of the Orbán government engaged in insider trading in connection to the Hungarian National Trade House’s withdrawal of 3.8 billion forints from Quaestor shortly before the brokerage’s securities unit announced its bankruptcy.

However, the wheels of justice turn slowly in Hungary—very slowly. Legal proceedings connected to the Quaestor affair could drag on for many years and might even last longer than the Orbán government itself.

And even if Tarsoly is brought to trial, he had 19 days from the time of the Hungarian National Bank’s announcement that it would launch an investigation of Quaestor Securities until his arrest to destroy any evidence that might substantiate his company’s involvement in insider trading with the Orbán government.

Chief Prosecutor Péter Polt said that officials operating under his authority had waited almost three weeks to take Tarsoly into custody for questioning because “those who are potential suspects cannot be questioned previously as witnesses” (source in Hungarian).

Chief Prosecutor Polt’s wife is the director of personnel at the Hungarian National Bank (source in Hungarian). Polt’s daughter is the girlfriend of Csaba Tarsoly’s personal secretary, Zoltán Mikuska, who until January 2012 filled a high-ranking post in Viktor Orbán’s Prime Ministry (source in Hungarian).

Last updated: April 6, 2015.