LEGAL LOOPHOLES IN PYRAMID AND PONZI SCHEME REGULATIONS: A CAUTIONARY TALE FROM ALBANIA TO INDONESIA

Abstract

This paper examines the legal loopholes and regulatory measures taken in response to pyramid and Ponzi schemes, specifically analyzing the lessons learned from Albania's financial crisis in the 1990s and what insights Indonesia can learn. The collapse of these schemes in Albania, which had a catastrophic effect on the economy and triggered an entire social and political crisis, exposed significant measures in governance negligence, financial supervision, legal frameworks, and understanding of investments. Through an in-depth examination of the Albanian catastrophe experience, this paper examines the legal framework in terms of inadequate regulations, government negligence due to lack of experience handling Ponzi and pyramid scheme issues, and lack of investment literacy. The paper explores how Indonesia can enhance its legal and regulatory environment by drawing lessons from Albania's mistakes in the past. Suggestions involve strengthening financial authority roles, establishing specific regulations to regulate pyramid and Ponzi schemes, and providing comprehensive investment literacy education for investors. This study highlights the significance of legislative reform and efficient governance to prevent financial schemes that take advantage of legal loopholes and uneducated investors, ultimately leading to a more resilient and stable financial system. By examining Albania's experience, Indonesia may establish a proactive strategy to protect its citizens and economy from the dangers of pyramid and Ponzi schemes.