Financial websites have reported that MMM’s bitcoin exchange has collapsed – here is what we know about the company so far.
The scheme was named for its Russian founders, Sergei Mavrodi, his brother Vyacheslav Mavrodi, and Olga Melnikova – the three Ms standing for their surnames.
It was founded in Russia in 1989, originally importing computers and office equipment. It was accused of tax evasion in 1992, and that is when its real shenanigans began. The company moved over to financial operations, creating its successful ponzi scheme in 1994.
The scheme claimed 1000% returns and started an aggressive TV advertising campaign.
At its peak, the company took in 100 billion rubles. But that sort of income attracts the tax man. Just one of their subsidiaries owed 50 billion rubles, and the main company owed about 100 billion rubles. The company declared bankruptcy in 1997 as the scheme collapsed, resulting in at least 50 suicides by people who lost their fortunes. It was one of the world’s largest ponzi schemes and led to stricter regulations on Russia’s stock markets.
All told, in 2007 Sergei Mavrodi was found guilty of defrauding 10,000 investors out of 110 million rubles.
In 2011 Mavrodi was back with a new pyramid scheme, which he described as such. “This is a pyramid,” Mavrodi said in his appeal to the nation on his blog, according to Time Magazine. “It is a naked scheme, nothing more … People interact with each other and give each other money. For no reason!”
In 2012, he further pledged to cause a Financial Apocalypse.
Arriving on our sunny shores in 2015 with obnoxious advertising that told people to ‘stop being poor’ – the scheme claimed it could generate a “30% per month” return through a “social financial network”
This falls foul of the Consumer Protection Act, which says that only a maximum of 27% can be offered annually.
To put this in context on how obviously this was a scam, understand that according to Money Growth in 2015, the Satrix 40 on a three year investment gave an average annual return of about 18.49%.
Now, according to Moneyweb, MMM’s bitcoin exchange, MMM Global, has shut down – following the revelation that it couldn’t pay its monthly 100% returns.
The Hawks have opened an inquiry into the scheme following an investigation by the National Consumer Commission, but there is a question over jurisdiction “since everything is done through the Internet”, according to Hawks spokesperson, Hangwani Mulaudzi .
According to Behind MLM, a website that investigates multi-level marketing schemes, they predict the collapse of the rest of MMM will soon follow suit.
“Here’s the thing though, whether it’s a 100% ROI, 30% or any other percentage – math doesn’t lie.
“MMM Global cannot sustain paying out more than is invested. And as long as affiliate investment is the only source of revenue entering the scheme, any MMM Global scheme will ultimately collapse.
“MMM Global’s Ponzi clones offering a lower percentage haven’t “proved” themselves any more than MMM Global did,” Behind MLM explained.
According to Fin24, MMM South Africa is still operational, and that the crash shouldn’t impact its members.
MMM South Africa denies that it is a ponzi scheme, and instead claims that it is more akin to a stokvel.
“There’s nothing illegal about it, this is like a stokvel … If you’ve got spare money to invest, you can get 30% of that money at the end of 31 days,” a Nigerian who runs the scheme’s office at Cape Town train station told IOL.