The Albanian Case by Artur Kurasiński


The post was originally published in Polish on Artur’s LinkedIn profile. Artur kindly agreed that we repost what we think is of great value to our readers.

There is one European country where every third citizen has invested in a pyramid scheme that led to a massive financial crisis. How did this happen?

We are talking about Albania. The country was set free from communism in the 90s, only to get into further trouble. Citizens without experience or understanding of market mechanisms have become easy prey for fraudsters.

It wasn’t just farmers and peasants who decided to take a risk that ended in financial suicide. The middle class, believing in the promised profits, sold their homes, moved into rented apartments, and then invested money in precarious businesses.

Albania, leapfrogging from socialism into the embrace of capitalism, was initially successful. Between 1993 and 1995, the rate of economic growth was over 8% per year. While some of this growth was real, it allowed pyramid schemes to flourish.

Vefa, one of these pyramids, owned many authentic assets: a supermarket chain, gas stations, recognizable brands. They offered their investors rewards that seemed too good to be true. As pyramid schemes grew, they invested in advertising on newly established private TV stations and newspapers. The media began to promote its projects.

As you can guess, the financial pyramids were not based on any real value. The system was about borrowing from new investors and distributing these funds among previous participants. A skillful manipulation that lasted as long as new funds kept flowing.

Most people didn’t ask questions. There were rumors that it could all be money laundry. However, most people have never cared where the money comes from, as long as they received their return on investment.

They were naïve, but there were also those who knew something was wrong, but hoped to get out in time, before everything collapsed. In the final phase of the scam (1996), many new people joined because they wanted to live like their neighbors who received extraordinary returns. Not for long.

In January, ‘investment projects,’ which were mostly money launderers and arms trades, were unable to make withdrawals. At this point, almost every third Albanian has invested his money in them.

The collapse of these financial pyramids caused chaos. In the confusion that followed the collapse, the country’s arsenals were looted and more than 700,000 weapons evaporated.

In five years, Albania has gone from optimism and confidence to total disaster.

Many people have lost their homes, businesses have gone bankrupt and the entire Albanian economy has fallen into a severe crisis. Confidence in the financial system has also been shaken for many years.

What about scammers? The maximum penalty for fraud was five years. Most of those who built the Albanian pyramids have served their sentences a long time ago, if they were caught at all. Some of them must be having a good time at upclass restaurants in Tirana.


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