Albania’s Ponzi Schemes: A Story of Deception and Chaos

The Great Collapse of 1997

In 1997, Albania was plunged into chaos as multiple pyramid schemes collapsed, leaving thousands of people with financial ruin and widespread unrest. The schemes, which promised high returns to investors, drew in nearly two-thirds of the country’s population and ultimately led to a nationwide rebellion.

How the Schemes Worked

The pyramid schemes, known as “pyramids” due to their hierarchical structure, were created by a handful of entrepreneurs who promised unusually high returns on investments. These promises were often made with little or no collateral, making it difficult for investors to recoup their losses when the schemes inevitably collapsed.

Notable Pyramid Schemes

Vefa Holding

• Created in 1994 and went bankrupt in 1998.
• Its president, Vehbi Alimuça, was imprisoned while its supermarket in downtown Tirana was bombed just weeks before elections in May 1996.

Gjallica

• Founded by three former State Security operatives from Kukes.
• It went bankrupt on February 5, 1997, prompting violent protests in Vlora that later turned into rebellion against the government.

People’s Democracy-Xhaferri

• Established in 1995 and operated in the villages of Lushnja, Fier, and Berat.
• Its leader, Rrapush Xhaferri, was arrested on January 22, 1997, which triggered violent demonstrations in Lushnje on January 24-25.

Populli

• Created on July 16, 1996, and operated in the same areas as Xhaferri.
• Its president, Bashkim Driza, a former State Security agent, worked closely with Albanian opposition parties and financed their campaigns and newsletters.

The Aftermath of the Schemes’ Collapse

When the riots of 1997 broke out, Driza fled to Uruguay where he lived for over a decade before being arrested by Uruguayan police in September 2008. However, just as he was about to be extradited to Albania in February 2009, he escaped from his apartment.

The collapse of the pyramid schemes had a devastating impact on Albania’s economy and society. It is estimated that the face value of the schemes’ liabilities totaled $1.2 billion, nearly half of Albania’s GDP at the time. The unrest led to a nationwide rebellion, with widespread protests and riots across the country.

Lessons Learned

The legacy of Albania’s pyramid schemes continues to be felt today, with many experts warning of the dangers of unregulated financial systems and the importance of protecting investors from fraudsters. As one expert noted, “the pyramid schemes in Albania were a perfect storm of greed, deception, and chaos that left a trail of destruction in its wake.”