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Diamond Shield Management Scam Prevention Tips: Why Are Albanian Ponzi Schemes Still Relevant Today?

Back in the 90s, Albania, a small European country, was struggling with post-communist recovery. For decades, the small nation has been one of the poorest in Europe. However, after communism collapsed, there was hope. Unfortunately, it didn’t materialize. Not for the laypeople, at least.

Albania was at the center of a massive Ponzi scheme. Initially, people believed this would be a post-communist economic success. However, only a few lucky ones got rich. As it often happens in Ponzi schemes.

Just like other ex-communist countries, Albania faced a debacle in financial regulations. The transition towards democracy was long and intricate. So, many profited from the weak legislative framework. This is how Ponzi schemes proliferated.

They took the form of alternative finance companies. These were foreign exchange dealers. Finance companies acting like private banks participated in the scheme. These companies offered investment opportunities and remittances from abroad. Initially, the projectseemed beneficial. However, it turned out to be a cunning pyramid system.

At its peak, more than half of the country’s population was part of the system. The hookwas significant returns. Yet, these were mere promises. Let’s see why Albanian Ponzi schemes are still relevant today. More so, what can we learn from them?

Read more at Ponzi scheme news.

Albania’s 1990’s Ponzi Schemes

Albania’s pyramid schemes thrived in the 90s. 1996 was the climax. By then, the money invested in these schemes equaled 50% of the national GDP. How did it all happen? Well, the change of political leadership was key. People were thrilled to turn to capitalism. However, the sudden shift was not feasible. Many ex-communist countries struggled with corruption and a weak legislative system. For most, it took years to embrace real democracy.

Albania was no exception. The country wasn’t ready for capitalism yet. But crooks were. They only needed the proper contexts. And this came after the Communism regime collapsed. This prompted fresh entrepreneurs to open companies. Some were legit, but many weren’t. Those involved in the Ponzi schemes belonged to the latter group.

Thus, many financial companies sprung overnight. They all had good marketing too. They tried to lure as many investors as possible. In exchange, they promised high returns. Some even pledged to triple investors’ money in 90 days. Most of these companies counted on high interest rates. To enjoy them, people made deposits. Some placed all their savings and trust in these companies.

In the beginning, even the government supported these financial companies. Many of which were based abroad. They did this through TV advertisements. All this created false expectations. Everyone believed they could get rich quickly. Furthermore, people sold valuable possessions and real estate. The aim was to get money. Then, they could invest it in one of the promising offers. Farmers even sold their livestock and lands. There was a national frenzy.

However, the end came soon. Ponzi schemes are functional if new investors join. At a certain point, there were no more new investors. In the end, the country only had three million citizens. So, what happened?

The Lessons We Can Learn

In 1996, the first company in the system collapsed. The reason? There were no more new investors. Hence, the company could no longer pay interest to old ones. Therefore, it became unsustainable. Other companies soon followed. In four months, all the major pyramid schemes collapsed.

The social and economic consequences were drastic. In short, here is what happened

– There was civil unrest and disorder

– The government also collapsed

– The violent social unrest claimed 2,000 lives

– Foreign armies stepped in to halt the conflict

And all was caused by a few greedy privately-owned companies. These took people’s money. Moreover, they caused an economic disaster. The lack of firm governance and corruption supported the Ponzi system. In the beginning, many companies were legit. One example was Vefa Holding. It dealt with real estate investments.

However, new competitors emerged. Hence, companies provided more appealing interest rates to lure more investors. The government collapsed, and a new one followed. However, most people didn’t recover their money. This often happens in Ponzi schemes. Authorities can’t reimburse victimsbecause companies often hide or lose money. Therefore, the state can only recover some assets. Then, it divides them among the victims.

This is the first lesson to learn from Ponzi schemes. If you invest in a pyramid system, you risk everything. If it collapses, you’ll probably lose money. Secondly, never trust offers that look too good to be true. This is a common trait of Ponzi schemes. Finally, be even more skeptical if your country has weak regulations. The justice system might be unable to punish the fraudsters.

Bottom Line

Albanian Ponzi schemes are evergreen. They are as relevant today as back in the 90s. These schemes keep on multiplying. They just change form. Recent Ponzi schemes revolved around cryptocurrency investments. However, the stock market also had its fair share of Ponzi schemes.

Guest post brought to you by Diamond Shield Management Scam Prevention Dept.

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