grep -i (case-insensitive) is broken with UTF8

$ export LC_ALL=tr_TR.utf8
$ printf "IIIIIII\n" > in
$ ./grep -i .... in > out

Here, in and out should have the same content, but they do not.
$ diff in out
Binary files in and out differ

Here's why (difference in the encoding):
$ cat in | od -c
000000   I   I   I   I   I   I   I  \n
$ cat out | od -c
0000000   I   I   I   I   I   I   I  \n  \0  \0  \0  \0  \0  \0  \0
__________
MORE INFO:
# Without -i switch everything works correctly
$ echo -e 'AA UTF8 char \xC4\xB0 12345\nAA 12345' | ./grep 'AA'
AA UTF8 char İ 12345
AA 12345

# With -i it breaks
$ echo -e 'AA UTF8 char \xC4\xB0 12345\nAA 12345' | grep -i 'AA'
> AA UTF8 char İ 12345AA 12345

As you can see it somehow deletes the new line character in the line which has an UTF8 'İ' character.