Like other economies transitioning out of socialism around the same time, Romania in the early 1990s was a fairly dismal place. Offering a bit of hope to many was a local ‘mutual-aid’ financial scheme called Caritas. While appealing to people’s desperation, apathy, and frustrations, Caritas was clearly not a normal financial institution. It promised extraordinary returns on investment, potentially with no end. Regrettably, there was no way the scheme could have been sustained without new investments being made into Caritas. It turned out not only to be a ponzi scheme but one of the largest such in history.


            Romania’s economy was slow to improve after Nicolae Ceaușescu’s death in 1989; like that of Russia, the economy even worsened further into the 1990s. Its poverty was among the worst in Europe. Annual inflation was high, well in excess of 100%, rendering the pensions of retired workers worthless over time. There were also frequent strikes and unrest that resulted in a change of government in 1991. As elsewhere in Eastern Europe, the economy was transitioning away from communism despite a profound unfamiliarity with capitalism among the public. All of these characteristics of Romania in the early 1990s combined to feed a massive ponzi scheme, among the largest in history, particularly when compared to the size of the country’s small economy.


            The scheme in question, Caritas, was founded in April 1992 by Romanian bookkeeper Ioan Stoica. He had left his employer, an equipment maker for the chemical industry, to start Caritas and opened its first office in his hometown of Brasov. He was quickly joined in the project by Gheorghe Funar, the leader of the Romanian National Unity Party, a nationalist political party, and the mayor of Cluj in Transylvania.

            The support of Funar meant that Caritas moved to Cluj two months after being founded. It was given space in a local newspaper to advertise and the city’s stadium and parts of the city hall were handed over to Stoica to create offices for Caritas. These facilities, locals said, lent Caritas extra credibility. What Stoica had founded was essentially a ponzi scheme promising to multiply eightfold the deposits left with it for a mere three months. As for what Gheorghe Funar got out of it, Caritas made gifts to Romanian National Unity Party members of parliament.

            Ioan Stoica did not elaborate on how Caritas worked, not that many people asked. In any case, though presenting itself in the manner of a charity at times, it in no manner functioned like the international Catholic charity by the same name. In the coming mania for Caritas, when the American anthropologist Katherine Verdery, a specialist in Romania, asked people how Caritas managed to pay out so much, she found investors in the scheme largely didn’t care.

            The public was just acting off what they saw on television, namely people successfully withdrawing huge sums from Stoica’s scheme. So little was the public’s understanding that they would brush off any insinuation of something criminal afoot, not because they did not think it was plausible but rather because it did not really interest them so long as they managed to get out of the scheme before it collapsed. The fact of its criminality would, by the very nature of any ponzi scheme, leave most people ruined, including those who figured they would come out alright. But this fact struggled to get attention amidst people’s immediate day-to-day economic concerns. In any case, a widely circulated promotional pamphlet about the scheme, titled ‘The Caritas Phenomenon, or Romanians Save Themselves’, was released. However, this polemic offered readers a damnation of foreigners and their exploitation of Romania but not any explanation of how Caritas actually worked.

The Caritas Phenomenon, or Romanians Save Themselves

Miracle, Game, or Crime

            In addition to appealing to jingoism, Stoica appealed to the religious. Nicknamed ‘the Pope’, Stoica spoke frequently of his faith, used religious expressions in his speech often, and was thought to donate money to churches. According to many, he appeared to be a genuinely god-fearing man. He was described as something of a messiah while depositors travelling to Cluj to leave their money were said to be on pilgrimages. Caritas was likened to a miracle.

            Seemingly contradictory though it may be, the supposedly charitable scheme was also popularly referred to as a ‘game’ and investors were referred to as ‘winners’. There would be many so-called ‘winners’, at least for a time. The ponzi scheme Stoica created was particularly well-marketed. It was just one of many to be formed in Romania in the early 1990s but was the only one to take off to such proportions, raising huge sums of money. Caritas kept a 10% commission out of every deposit for itself.

            The intelligence agency in Romania alerted the government in June 1993 that it thought the scheme was being used to launder “Italian funds of illicit provenance”. It suggested that Italian organized crime may have had some roll in backing the scheme. Stoica had previously lived in Milan and spoke Italian. While the Italian connection was the most widely believed, Caritas was linked to all sorts of crime, including gun-running in neighboring Yugoslavia. Stoica himself had earlier in life been imprisoned for embezzlement.


            Participation in Caritas was initially limited to residents of Cluj but was expanded to serve all Romanians in the summer of 1993. By this point though, the intelligence agency’s report had said that 1.2 million people had already made deposits in the first five months of the year alone; it was common for city residents to make deposits on others’ behalf. These 1.2 million depositors came before the Caritas scheme enlarged still further.

            As early investors in a ponzi scheme, they were more likely to have made money from it. Caritas continued to promise an eightfold return over three months; three months was the minimum term for deposits. Those who earned this return had their names printed in a Cluj newspaper to publicize the scheme. The list of ‘winners’ was 44-pages long, with approximately 22,000 names per day, by October 1993.

Many of these were repeat investors; people often withdrew their initial investment and a little more once the had ‘won’ but were generally happy to ‘play’ with what they saw as the house’s money thereafter. So, most of the gains stayed with Caritas, enabling the ponzi scheme to continue longer than one would think with such aggressive returns being promised which would normally cause such schemes to unravel quite quickly.

            Economic circumstances offered some explanation for how this grew to such large proportions. Savers were eager to find investments that paid more than the 250-300% annual rate of inflation. A savings account in Romania then paid just 50% interest. Thus, it’s understandable why many people took the risk. Keeping the money in a bank would be a certain loss over time.

            The crowds descending on Cluj were massive. Lines to place deposits were so great that people camped inside the city stadium overnight. As in other Eastern Bloc countries, the people were experienced in queuing. To support the crowds, bus operators added special buses to Cluj and trains increased service as well. The city’s hotels boasted very high occupancy rates. These depositors from elsewhere arrived in a city shaped by the frenzy. Cluj became comparatively wealthy as early investors cashed out. The price of an apartment there tripled in the summer months of 1993 alone, far exceeding what could be explained by the general inflation underway. Indeed, prices far exceeded those of apartments in the capital city, Bucharest.

            Complementing his ponzi scheme, Ioan Stoica opened up a luxury supermarket in Cluj. Car registration data implied that the ownership of cars per capita was the fifth highest of any city in Europe. Workers’ wages increased rapidly. A beggar on Cluj’s streets was said to make 300,000 lei in a day or six times the usually monthly take home pay of a Romanian worker. The popular opinion was that people were quitting their jobs and refusing to work, expecting to live off their Caritas fortune or the crumbs they might receive from others.

            Helping keep the scheme going as it grew too large to sustain late in the frenzy, the politically influential mining trade union leader Miron Cosma endorsed the scheme. A new office was opened in a mining town, Petrosani, where Cosma himself made a 1.3 million lei deposit. Three million Romanians invested at least $1 billion or approximately one trillion lei with Caritas. Perhaps close to half of Romanian households had someone invested in the scheme. The amount invested was half the size of the Romanian state budget for 1993. Stoica became one of the most well-known and well-liked men in the country.


            In autumn of 1993, Caritas was estimated to be in possession of one-third of the country’s banknotes, according to the president of the National Bank of Romania. Unfortunately for those with much of their money tied up in the scheme, especially those who had withdrawn nothing, it began to unravel. Newspapers had already been predicting the inevitable demise of the scheme, as did Romanian president Ion Iliescu in a press conference. Redemptions became less forthcoming; they were suspended entirely for two days in October 1993; a computer glitch was blamed. The pace of honoring withdrawals remained slow and were sometimes only partially paid out thereafter. Even the salaries of Caritas employees were going unpaid.

            The report prepared by the intelligence agency back in the summer, referenced earlier, was leaked to the public in November. Also late in 1993, a report by the National Bank of Romania, also leaked, claimed that Caritas controlled only 11% of the resources it claimed. Redemptions remained stuck through the rest of the year. Caritas seemed unable to redeem its July 5th deposits even two months after they were due for redemption.

            Stoica did manage to offer explanations for the delay but in January 1994, a mob broke into the city hall of Cluj. The next month, Stoica initially declared that Caritas would be reorganizing and that the minimum deposit term would be extended but soon thereafter its operations were altogether suspended, according to Stoica because officials in Bucharest denied him permission to open a branch there. There was no way of paying everyone back and Stoica announced the closure of Caritas on May 19, 1994.

            Ioan Stoica would be arrested and sentenced to six years in prison. The ponzi scheme he started was not unique in construct. There were other such frauds in Romania and Eastern Europe in the 1990s. Similar schemes afflicted Albania, Russia, Slovakia, and Bulgaria. However, relative to the size of the country, Romania’s Caritas was the largest.


            Its thought that most people do not want to get caught up in ponzi schemes and most governments would never allow them. However, where people are desperate and governments fragile, these theories might not hold and thus ponzi schemes can be hard to stop. Encapsulating this possibility were remarks from President Ion Iliescu who noted, probably correctly in both instances, that firstly, anyone with an elementary education should have known it would all come to ruin and secondly, that “there will be a national uproar if we try to stop Caritas.” Like a speculative bubble, a dubious get-rich-quick scheme can offer possibilities too alluring to keep clear of.

More from the Tontine Coffee-House

           Read about a similar ponzi scheme mania that gripped Albania and a postage stamp investment fraud in Spain. Consider subscribing to this blog’s newsletter or checking out book recommendations, which include many of the sources often referenced in my posts. 

Further Reading

1.      Barber, Tony. Romanians Storm City as Scam Ruins Millions, The Independent, 16 Jan. 1994.

2.      McPherson, William. Transylvania’s S&L, The Washington Post, 21 Nov. 1993.

3.      Perlez, Jane. Pyramid Scheme a Trap for Many Romanians, The New York Times, 13 Nov. 1993.

4.      Verdery, Katherine. “Faith, Hope, and Caritas in the Land of the Pyramids: Romania, 1990 to 1994.” Comparative Studies in Society and History, vol. 37, no. 4, 1995, pp. 625–669.

5.      Verdery, Katherine. “‘Caritas’: And the reconceptualization of money in Romania.” Anthropology Today, vol. 11, no. 1, Feb. 1995, pp. 3–7.

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