Pyramid Schemes: A Story Through Caritas

Ioan Stoica was a business man in Romania that most of the country liked and supported. He was a man that wanted to give back to the poor and homeless, assist in his civic duty to the state and to the city of Cluj, and to do what he could for the people of Romania.

At least that's what he wanted everyone to think at the time.

Stoica was a business man, that part is true. But he was a business man out for himself. He started Caritas knowing that it would eventually harm a lot of people. The state of Romania was already in the process of making all pyramid schemes illegal, yet he still made his company in the heart of one of the biggest cities in Romania. Not only did this affect the city itself, but it affected the entire state and sometimes people from other states, i.e. Germany.

Originally, only those people who lived in Cluj or in Romania could deposit money into Caritas. But this later extended to anyone that was a Romanian citizen or had friends who lived in Romania. These people could travel and make deposits on their own in Cluj or they could send the money and have it deposited. The fact that Caritas was far reaching in Europe, especially outside of Eastern Europe, showed how personable Stoica was to everyone. People trusted him to do what was right. After all, they entrusted him with anywhere from 1,000 to 10,000 Romanian leis. This equates to anywhere from $255 to $2,555 USD. That's a large sum of money for many people in Romania.

The people trusted him because they had nowhere else to turn to. They would be turned down by the big banks or the government for services that they truly needed, i.e. a tractor for their farm. This resulted in them having to put in a large sum of money to get it back 8 fold in 3 months. This was a huge gamble that I'm sure not everyone truly understood. They just wanted to live their lives freely without a worry, so they had to trust the one person that would give them what they wanted, Ioan Stoica.

Throughout the history of Caritas, the company wouldn't give back to the people in the order of which they deposited money. They would sometimes give to the politicians much more quickly (sometimes 3 days instead of 3 months) and even more quickly for the people who helped the company start up (sometimes instantly). This would be the one major reason that the company collapsed sooner than it originally planned.

At the fall of the company, Stoica agreed to pay back the exact sum that the first time depositors who had not received money from the company. But this meant that those individuals that continued to invest into the company would receive no money back. In the end, Stoica would be arrested and charged with fraud, fraudulent bankruptcy, and false representation. The people had trusted Stoica with their money and trusted that he could deliver on his promises. These promises were not delivered and the people were angry.

While pyramid schemes initially sound good for people in dire need of money, this story alone shows how quickly fate can change. Some people sold their apartments and houses to entrust such a large sum of money with Stoica with the understanding that they would receive the money back 8 fold, but the people didn't understand the legalities of this company and didn't know that it would end in bankruptcy and eventually legal proceedings.