A Russian fraudster convicted of running one of that country’s biggest pyramid schemes in the 1990s, in which millions of people lost their life savings, is now in charge of an operation with the same name in South Africa.
The MMM scheme, founded by convict Sergey Mavrodi and known locally as MMM South Africa, entices investors by advertising that in a month they will make a 30 percent profit.
This week the Communist Party of the Russian Federation sent an e-mail to the SACP warning about the scheme.
Thousands of South Africans are believed to have registered as investors in the intricate money-exchange scheme, and a consultant at MMM South Africa claimed 138 million people from 107 countries had signed up to it.
This week the scheme set off alarm bells and even reached the head of the National Consumer Commission, Ebrahim Mohamed, who yesterday got an SMS from MMM offering a 30 percent monthly return on investments.
National Consumer Commission spokesman Trevor Hattingh said Mohamed would refer the matter to the commission’s enforcement and investigation division soon.
“The matter needs to be assessed by the (commission) to establish the origins of MMM, and to study their business practices.
“In the meantime, consumers are strongly advised to not participate in what could very well be an outlawed pyramid scheme, where their monies could in all probability be lost,” Hattingh said.
The apparent mastermind of the scheme is Mavrodi.
Videos of him talking about the scheme in Russian, subtitled in English, are regularly posted on the scheme’s South African Facebook page.
In the latest video uploaded six days ago, subtitles quote him saying: “The development in South Africa is just marvellous… But nevertheless, you must keep developing the system. Don’t rest on laurels. Tell people how good and kind this system is, and that everyone gets paid here.”
This week the Communist Party of the Russian Federation warned about schemes it said Mavrodi was running in South Africa, India and the Philippines.
In an e-mail alert to the SACP on Wednesday, the Russian Federation said: “We consider it our duty to warn our fraternal peoples that this activity may result in bankrupting millions of people.
“We would like you to know that, as a result of such swindles in Russia, at least 15 million people suffered and went bankrupt.”
Eight years ago The Moscow Times reported Mavrodi, who at one stage was a Russian MP, had been convicted of masterminding the initial MMM scheme.
A judge found he defrauded MMM investors “by deception, betrayal and abuse of trust”.
“MMM was the first and the biggest in a series of financial pyramids that hit Russia in the 1990s. Mavrodi was found guilty of defrauding 10 000 investors out of 110 million rubles, though in reality millions of people lost money in the scheme.”
“Some 2 million to 10 million people lost their savings when the pyramid scheme folded in July 1994.”
Mavrodi was sentenced to four-and-a-half years in jail. It appears MMM schemes then resurfaced in 2011.
Yesterday Financial Services Board spokesman Lesego Mashigo said it was aware of the South African scheme, but because it had no mandate to investigate pyramid or ponzi schemes, it had referred the matter to the National Consumer Commission.
Hawks spokesman Hangwani Mulaudzi said officers knew of the original MMM scheme that scammed millions in Russia, but were unaware of a South African version.
The MMM South Africa website says the scheme is “a community where people help each other”. The “help” is transferred funds. Investors can be awarded bonuses, including a referral bonus.
Independent Media was unable to contact Mavrodi.
Questions about the scheme put to the scheme’s consultants had not been answered by Friday night.
MMM scheme ‘allows people to help each other’
If the MMM scheme is to be believed, it simply involves people helping each other.
On Friday a consultant for MMM South Africa explained that a minimum investment was R100.
Once registered on the website, an investor could log on and enter what is known as an online “personal office”.
An investor could then ask to “give help”, and the system would pair the investor with someone who needed “help”.
The help needed was funds.
Once an investor had transferred the funds, the investor was given “Mavro”, the system’s internal currency, to match the amount they had invested.
This was expected to grow by 30 percent a month.
The MMM South Africa website said: “There is no central account, where all the System money flows to (and where it can be easily stolen from). All the money is only on the banking accounts of the participants themselves. On a lot of thousand and million private accounts.
“Participants transfer each other money directly, without intermediaries.
In fact, MMM only regulates the process and nothing more… the System completely belongs to people.
“Without fools! It is a real mutual aid fund, where ordinary people help each other.”Independent On Saturday