Federal Judge Richard Berman opened a Wednesday hearing by requesting that prosecutors detail the geopolitical factors that influenced the government’s decision to resolve its lengthy criminal case against Halkbank, the Turkish state-owned lender accused of helping Iran evade U.S. sanctions.
The agreement, announced on Monday, triggered a sharp uptick in Halkbank’s stock price. If Judge Berman signs off, the deferred prosecution agreement would remove a persistent source of friction between the United States and Turkey - two NATO allies whose relations have warmed since the change in U.S. administration last year.
Prosecutors disclosed in court filings that the State Department had informed the Manhattan U.S. Attorney’s Office several months earlier that settling the Halkbank prosecution was an important component of diplomatic negotiations related to Turkey’s assistance in securing a ceasefire between Israel and Hamas scheduled for October 2025.
At the start of the hearing, Berman asked prosecutor Michael Lockard to explain how those diplomatic considerations fit into the judicial proceeding. Lockard replied that it is not the court’s role to evaluate the national security interests implicated by the case.
Under the deferred prosecution agreement, Halkbank would be prohibited from engaging in transactions that benefit Iran. The bank would also be required to retain a monitor tasked with reviewing its sanctions and anti-money-laundering compliance controls. The deal specifies that no monetary payment would be exchanged, and the charges are likely to be dismissed after the monitor confirms Halkbank’s adherence to the agreement.
Halkbank previously pleaded not guilty to the charges and, as part of the agreement, did not admit criminal wrongdoing.
Legal experts note that U.S. judges generally do not have broad discretion to reject deferred prosecution agreements based on the substance of their terms, but courts can examine whether such deals are supported by precedent. For the moment, both prosecutors and Halkbank have requested that Judge Berman pause the case for 90 days to allow the bank an opportunity to prove its compliance with the agreement.
In a letter to Judge Berman, Jay Clayton, the top federal prosecutor in Manhattan, argued that the deferred prosecution agreement would advance U.S. interests by hindering financial support for Iran’s government.
Turkish President Tayyip Erdogan has previously described the case as unlawful and "ugly."
Additionally, the publicity surrounding the agreement has raised investor interest. Promotional material included in public commentary asked whether investors should be buying HALKB now and described an AI-based stock selection tool that evaluates HALKB alongside other companies using financial metrics. That material promoted an AI product that claims to identify stocks with favorable risk-reward profiles and invited readers to check whether HALKB appears in any of its strategies.
Summary
The Manhattan U.S. District Court is seeking clarification from prosecutors on how diplomatic and national security considerations influenced the deferred prosecution agreement with Halkbank, a state-owned Turkish lender accused of helping Iran evade U.S. sanctions. The deal would bar Iran-related transactions, require an external compliance monitor, involve no direct payment, and could lead to dismissal of charges after proven compliance. Prosecutors and Halkbank have asked the court for a 90-day pause to test compliance.
Key points
- The deferred prosecution agreement forbids Halkbank from transactions that benefit Iran and mandates a sanctions and anti-money-laundering compliance monitor.
- Prosecutors told the court that the State Department viewed resolving the case as important to diplomatic negotiations over a ceasefire involving Israel and Hamas in October 2025.
- Prosecutors and Halkbank requested a 90-day stay to allow the bank to demonstrate compliance; no admission of guilt or monetary payment is part of the deal.
Risks and uncertainties
- Judicial scrutiny - The judge has asked prosecutors to explain the diplomatic rationale, introducing the prospect of closer court review of the deal - this affects the legal sector and financial markets sensitive to case outcomes.
- Compliance verification - The agreement’s success depends on the monitor’s findings; if compliance is not demonstrated, charges could proceed, which would impact banking and international finance sectors.
- Diplomatic dependence - The resolution was described as tied to ongoing diplomatic negotiations; changes in those negotiations could affect perceptions of the deal’s justification, with potential market and geopolitical consequences.