NEW VENTURE: Sergei Mavrodi, convicted years ago in Russia for having running a pyramid scheme, has founded another similar operation in South Africa.
NEW VENTURE: Sergei Mavrodi, convicted years ago in Russia for having running a pyramid scheme, has founded another similar operation in South Africa.

Notorious fraudster targets SA

By Caryn Dolley Time of article published Sep 5, 2015

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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 South African Communist Party (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.

This week the scheme set off alarm bells and even affected the head of the National Consumer Commission Ebrahim Mohamed, who yesterday received an SMS from MMM offering him 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 as soon as possible.

“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 posted on the scheme’s South African Facebook page.

In the latest video uploaded six days ago, he says: “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 to the SACP on Wednesday it 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 that Mavrodi, who at one stage was a Russian MP, was 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 roubles, though in reality millions of people lost money in the scheme,” the article said.

“Some two 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.

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, but were unaware of a South African version.

The MMM South Africa website describes the scheme as “a community where people help each other”.

Investors could be awarded various bonuses, including a referral bonus. “Inviting new members into the community is your additional contribution to its development. But nobody forces the members of the community to invite new participants,” the website said.

According to the Consumer Protection Act, a scheme is a pyramid scheme if participants are primarily compensated for recruiting others, rather than from selling any goods or services.

More than 23 000 people have liked the Facebook page for MMM South Africa and about two weeks ago a message was posted on it hitting back at those calling it a scam. “MMM is a community of donation exchange. MMM cannot be regarded as an illegal Ponzi scheme or pyramid scheme.”

Weekend Argus spoke to a consultant on the MMM South Africa website. The consultant said Mavrodi had founded the scheme.

Another consultant said there was no way for Weekend Argus to reach Mavrodi and would not give any contact details for him.

The consultant eventually provided his own work e-mail address.

Queries about the scheme and Mavrodi, including where he was, were not answered by last night.

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