Hungary's central bank-linked foundations are facing renewed scrutiny over their investment practices after a scathing report from the State Audit Office (ASZ) triggered a sell-off in assets linked to their portfolio.

The scandal has spread to Polish-based real estate developer Globe Trade Centre, listed on the Warsaw Stock Exchange. After the report by ASZ, yields on a 2026 euro bond issued by the company surged from 8.4% to 13% in a week, and its shares fell 7%.

In a report published last week, the ASZ found serious financial mismanagement in foundations set up by the MNB, leading to losses worth hundreds of billions of forints. The 373-page report published on its website revealed major mismanagement of public funds, lack of oversight and questionable investments.

The report found that the business circles aligned with Adam Matolcsy, the son of outgoing MNB Governor Gyorgy Matolcsy, have also reaped huge profits from real estate investments by MNB foundations. The ASZ filed a criminal complaint in the case.

Optima acquired a 62% stake in GTC in 2020, investing hundreds of billions of forints into the company. However, the ASZ report – corroborating long-standing claims from independent media, suggests that investments were made at inflated prices without proper financial oversight. Since the acquisition, GTC's share price has more than halved, wiping out an estimated HUF160bn (€400mn) in value.

Meanwhile, GTC has sought to downplay concerns, stating that Optima's troubles have "no direct impact" on its operations. However, the company postponed the release of its 2024 annual report last week, citing the need for additional time to consolidate a recently acquired German property portfolio.

The fallout from the scandal raises questions over whether GTC will be able to refinance its €500mn junk-rated bond. Erste Group Bank analyst Cezary Bernatek told Bloomberg that while the company is currently on track for refinancing, further deterioration in its financial position could lead to higher borrowing costs.

Another chunk of the funds managed by Optima was invested in Ultima Capital SA, a Swiss firm managing luxury apartments across Europe, which has also suffered significant losses. Previously, there were discussions about GTC acquiring Ultima, but the plan was abandoned due to shareholder opposition.

The audit also revealed that Optima had raised additional capital through loans and bond issuances linked to the Neumann Janos University Foundation, an entity with personal ties to former central bank governor Gyorgy Matolcsy.

The foundation bought HUF127bn bonds issued by Optima, received from state funds, at "exceptionally low rates", according to ASZ. The funds were channelled into the stock market and real estate investments that have since lost more than HUF200bn in value, basically wiping out state money earmarked for the operation of the university. This has also put the construction of a new campus in Kecskemet, 86 km east of Budapest and home to a Mercedes factory, at risk.

Investigators highlighted that Optima's transactions were conducted through an intricate network of asset managers, private equity funds, and both foreign and domestic holding companies, raising suspicions that the structure was designed to conceal financial details.

According to independent Valasz Online, Adam Matolcsy, son of the former central bank governor, managed the MNB foundations' assets under the alias "Petra Kovacs" using a Gmail account, overseeing the daily operations of companies controlling hundreds of billions in effectively untraceable public funds.

Opposition parties are calling for those responsible to be held accountable, demanding a full investigation into the financial mismanagement and potential legal consequences for those involved.

Prime Minister Viktor Orban in Parliament on Monday defended the government's lack of intervention when asked by opposition MPs, insisting that the central bank operates independently and is beyond the executive's control.