The MMM scheme

Millions of Nigerian patrons of the popular Ponzi scheme, Mavrodi Mundial Moneybox (MMM), were last week thrown into utter confusion when it placed a one-month ban on all withdrawals starting from December 13. The organisers of the scheme had in a letter displayed on the page of participants cited “heavy workload on system” as the reason for the ban.
Another reason for the ban is the alleged negative reports on the scheme by the media. The move raised fears that the money-making scheme which was long declared illegal by the Federal Government, may have crashed. But those behind the scheme insisted it had not crashed.
Despite that, close watchers of the scheme raised the alarm that the one-month freeze announced was similar to what happened in South Africa before the scheme finally crashed. With the ban in force, it then means that members who are due to withdraw both their capital and 30 per cent return on investment will not do so until sometime in January 2017.
It is sad that despite warnings by the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) that the scheme is fraudulent and may lead to loss of money, many Nigerians invested heavily in it. Even the House of Representatives call on law enforcement agencies to track down the promoters of the scheme and its mandate to its committees on banking and currency and financial crimes to investigate the scheme could stop Nigerians from patronising it.
MMM was established in 1989 by Sergei Mavrodi, his brother, Vyacheslav Mavrodi, and Olga Melnikova. The name of the company was taken from the first letters of the three founders’ surnames. The company initially imported computers and office equipment but could not sustain it due to accusation of tax evasion. It created the MMM in 1994.
It attracted money from private investors and promised annual returns of up to 1000 per cent. Since the shares were not quoted on any stock exchange, the company determined the share price and maintained a steady price growth of 1000 per cent annually, which made the public to believe its shares were a safe and profitable investment.
MMM began operating in South Africa in 2015 with the same business model, claiming a “30 per cent per month” return on investment through a “social financial network.” The group was identified as a possible pyramid scheme by the National Consumer Commission and accounts of clients were later frozen. In January 2016, the Chinese government banned MMM on the grounds that it is a pyramid scheme (Ponzi scheme), and it is not registered in the country. Since it is not registered, the Chinese authorities regarded it as a fraudulent scheme.
The MMM launched a website in November 2015 targetting the Nigerian audience and claimed a “30 per cent per month” return on investment amidst other acquirable bonuses. The entity was self-described as a “mutual aid fund” where ordinary people help each other. About 2.4 million Nigerians had reportedly signed up by late 2016, with the country’s unemployed as primary targets. Over 3 million Nigerians have reportedly hooked onto the scheme as at last week when it suspended its withdrawals.
We urge Nigerians to desist from investing in any scheme that has no product and is not quoted on the NSE such as the MMM. They should not fall prey to fast money-making schemes. The risks are more when the transaction is not documented and nobody could be held responsible in the case of any crash. It is wise that they heed the warnings from the CBN, SEC and other agencies of government on the operations of MMM.
Perhaps, the depressed economy and the rising unemployment in the country may have pushed some Nigerians to fall for the MMM craze. Even the crash on the nation’s stock market may have also made MMM scheme very attractive to some Nigerians. But, the Director of Development Finance Department of the CBN, Dr. Mudashiru Olaitan, has advised those involved in the MMM to be careful in finding means of multiplying their income.
We believe that Nigerians ought to have learnt enough lessons from the failed operations of wonder banks. Instead of putting their hard earned money on risky Ponzi schemes, they should deploy them to gainful and worthwhile ventures.