The National Consumer Commission of South Africa has implored consumers to look at the bigger picture of schemes like MMM – before there are financial “casualties”.
Speaking to Cape Talk radio, NCC deputy commissioner Thezi Mabuza said that the group has identified a number of elements in MMM that are associated with pyramids schemes – as defined by the Consumer Protection Act.
A number of South African banks have started freezing accounts associated with the scheme, while the group is currently under investigation by the Hawks.
Mabuza noted that MMM guarantees a return of 30% on any fees put into the system – which is 20% above the repo rate, and one of the key signifiers of a multiplication scheme.
The NCC official also explained that the scheme is dependent on users recruiting other users – all while each person is required to pay to join, through what the platform calls “donations”.
Last week, MMM sent out a notification to users that its platform had collapsed, as the ‘interference’ from banks had caused its internal currency to lose all value.
The scheme has now started over, with a plan to return equal value of the old currency to users, using a portion of the new money coming in through “donations”.
As the system is entirely based on its users putting money in, this move effectively places a debt burden on all users now using the system.
MMM users have defended the platform, calling it the answer to the control exerted by South African banks. They claim that the scheme’s recent collapse was orchestrated by the big banks and the media, who are seeking to discredit it as legitimate alternative to banks.
Notably, members cannot take part in MMM without linking a bank account from on the major South African banks.
Mabuza has taken note of the perception from MMM users that it is “government trying to clamp down”, but she implored that people should not wait for “casualties” – for people to lose all their money – before they see the bigger picture.
“Because now we don’t have causalities, people are saying it is just government trying to clamp down. But they don’t see the bigger picture. Don’t wait until there are casualties,” she said.
“As the regulator, we see what is happening, and we need to act.”
MMM was started by convicted Russian fraudster, Sergey Mavrodi, who has spent time in jail for defrauding millions from users of his scheme. He has not been heard from since MMM started making headlines across South Africa in mid April.
Mavrodi would post weekly updates to the MMM Facebook group, butis speculated to have gone into hiding.