Alleged SA Ponzi scheme MMM’s global pyramid collapses

Cape Town – Sergey Mavrodi's Bitcoin-based MMM Global Republic of Bitcoin scheme has collapsed, affecting the local branch of MMM Global.

New Russian anti-Ponzi law could target MMM founder
MMM: Pyramid scheme, stokvel or wealth revolution?

MMM Global South Africa – its local branch - is one of nine companies being investigated for being an alleged Ponzi scheme by the South African Police Service’s Specialised Commercial Crimes Unit, after the National Consumer Commission’s initial probe in 2015.

The South African “community” has been growing in numbers over the years, as South Africans seek ways to escape debt and poverty. It has even been described as a stokvel by some, and has become an emotive topic for those who buy into it.

Officially, the SA platform said its members are encouraged to donate money to others by rewarding them with the bitcoin-linked virtual currency - Mavros - in return, and can apparently get 30% return on their rand investment by doing so. A Ponzi scheme occurs when a return is 20% higher than the repo rate, which in SA is 7%.

“We regret to inform you that we have to close down the Republic of Bitcoin. It was an experiment, and, unfortunately, it failed,” the last Facebook entry on MMM Global Republic of Bitcoin states. “We turned out not to be able to pay 100% per month.”

The alleged scheme is based on the bitcoin currency, which is a digital asset and a payment system.

The South African version of MMM, which offers 30% returns, is still operational and said the crash will not affect is members.

MMM Global cannot sustain paying

A website that investigates multi-level marketing schemes predicted the collapse a few days before it happened.

On April 9, it revealed the implosion. “The financial apocalypse is upon us, MMM Global has collapsed,” BehindMLM reported.

“MMM Global’s Ponzi clones offering a lower percentage haven’t ‘proved’ themselves any more than MMM Global did,” it said.

“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.

“They’ll continue to pay ROIs (return on investments) until withdrawals exceed the rate of new investment, and then run out of money all the same. One only needs to look at the collapse of MMM China for evidence of what’s to come.

“Unfortunately for most MMM Global investors, the collapse is the end of the line. Those unlucky enough to live in countries where MMM Global runs secondary scams (like South Africa), were informed their accounts would be transferred over.”

Mavrodi has executed his exit strategy - claim

BehindMLM said Mavrodi “executed his exit strategy a few weeks ago. On March 20th Mavrodi informed investors there would be no more news updates published to the MMM Global website”.

“Mavrodi has not been heard from or seen since, and is presumed to be on the run. It’s highly likely he withdrew and/or transferred out as much of the money he stole from investors before fleeing.”

However, a Youtube video dated April 11 has been seen of Mavrodi giving his usual update in Russian, although the date on the video cannot be verified.

Financial Times reported on Monday that, while it is yet to confirm with its Mavrodi sources, “if internet reports are anything to go by it looks like Mavrodi’s latest scheme … dubbed a ‘mutual aid social network’ … collapsed over the weekend, with thousands of investors (a lot of them in emerging markets) locked out of investment accounts they had been promised would yield them 100% returns per month”.

Have you been affected? Tell Fin24 now.

MMM follows classic pyramid structure - City Press

Consumer journalist Maya Fisher-French unpacked the South African MMM scheme on March 30, predicting that it would collapse soon.

"With increasing concerns around the viability of MMM and an investigation under way by the police, no doubt to be followed by the Receiver of Revenue, it appears likely that MMM will collapse sooner rather than later,"she wrote.

"Based on the information provided on the website, MMM follows a classic pyramid structure," she said. "The participants derive their income or returns primarily for the recruitment of new members. In other words, the returns are not based on investments or the selling of any product, but on money paid by new people joining. The philosophy is that you offer assistance by paying a joining fee."

FULL STORY: What is the deal with MMM?

MMM SA defends operation

However, MMM Global South Africa refuted the claims that it was a Ponzi scheme or that it was collapsing on Monday.

“In the MMM community there are many different countries,” a member of the MMM SA team said in a Facebook message to Fin24 on Monday.

“One of them was the Republic of Bitcoin. It was a ‘synthetic’ country which united participants from many different countries who provided and received help with bitcoins.

“Sometimes it created confusion for the people, they asked whether they should join the Republic of Bitcoin (RB) or MMM SA, RB or MMM France, etc.

“We decided to dissolve the Republic of Bitcoin and people will continue to participate in their specific countries. So, those South Africans who participated in the Republic of Bitcoin will be moved to MMM South Africa. And people will be able to continue to participate and will continue to receive help on the South African Platform.”

MMM South Africa calls itself "a community of ordinary people, selflessly helping each other" on its colourful website. "The goal here is not the money. The goal is to destroy the world's unjust financial system."

WATCH: Bitcoin spikes when MMM started in China

Not a Ponzi scheme - member

The anonymous member told Fin24 that MMM does not receive payment and does not pay its members, so therefore cannot be classified a Ponzi scheme. “MMM is a platform for the exchange of donations where people send money (pay) to each other.”

“When you call the MMM Community a Ponzi scheme, it creates a misunderstanding,” the person said. “In MMM people donate (not invest) money to each other without any promises or guarantees. MMM does not offer any return or an interest rate.

“MMM honestly tell people how it really works and do not promise people any return on the investments. As a donation programme, how is it possible to lose your donation? In MMM people ask each other to help them. It depends on the members themselves to maintain the continuation of the process of the provision of help to each other.

“MMM does not make any promises and do not claim to generate any return as Ponzi schemes do. On the MMM website, it is written with capital letters that there are no promises or guarantees.

"After MMM members donate money, they may be rewarded with Mavro (the bitcoin currency)," the person said.

“Usually Mavro grows 30% a month. Mavro is not an asset or currency, Mavro is a motivation instrument. With Mavro, MMM motivates its members to help each other by providing financial assistance.

“Because Mavro is not a financial instrument, its growth rate can be easily adjusted to balance PH (providing help, inflow) and GH (getting help, outflow). The flow of provided assistance and assistance received will always be kept in balance.

“The MMM Community has been operating for many years. More and more people are joining now. Unfortunately, sometimes there is a misunderstanding when people try to present MMM as an investment project or money making scheme.”

WATCH: A MMM user from Pietermaritzburg shares her experience

WATCH: Interview with Sergey Mavrodi

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