Why Many People Are In Trouble..
All through last week there was sorrow, and tears all over Nigeria when news broke that the popular get rich quick scheme, called MMM had crashed with many losing their millions.
How did the news break?
Dear members, as usual in the New Year season, the system is experiencing heavy workload. “Moreover, it has to deal with the constant frenzy provoked by authorities in the mass media. The things are still going well; the participants feel calm; everyone gets paid, as you can see, there haven’t been any payment delays or other problems yet but it is better to avoid taking the risk, Moreover, there are just three weeks left to the New Year.
“On the basis of the above mentioned, therefore, all confirmed Mavros will be frozen for a month. The reason for this measure is evident. We need to prevent any problems during the New Year and then, when everything calms down, this measure will be cancelled, which we will definitely do. We hope for your understanding, Administration.” Fast-rising Ponzi scheme, Mavrodi Mundial Moneybox, popularly referred to as MMM. On the Tuesday, December 13, 2016 jolted millions of Nigerians and spelt a bleak Yuletide for apprehensive participants when it placed a one-month frozen status on all withdrawals starting from Tuesday, December 13, 2016 sparking uncertainties and fears that the popular scheme, which has since been declared illegal by the Federal Government, has finally crashed.
A letter boldly written on page of registered participants of the scheme cited “heavy workload on system” as the reason for the suspension.
This means that Mavros (participants) who are due to withdraw both their capital and 30 per cent return on investment will no longer be able to do so until sometime in January 2017.
According to the letter which was written by the founder, the ban on withdrawals is partly due to negative reports by the media on the scheme.
Participants who were alarmed by the letter, in the apprehension that their investments are gone, stormed the Economic and Financial Crimes Commission (EFCC) the following day for help, only to get mocked by the commission, which had initially warned all participants of the scheme.
A groom-to-be named Adakole attempted suicide at the news of accounts frozen by MMM organizers.
Adakole, a groom-to-be reportedly drank insecticide in Otukpo, Benue state after he heard about the crash of the Ponzi scheme.
On hearing the news, Adakole, whose wedding was scheduled to hold on Wednesday, December 28, drank insecticide.
Daily Post reports that Adakole invested N300,000 into the scheme last month.
He was expecting to reap his 30 per cent income to help in his preparation for his wedding.
Witness said the new MMM participant went ‘mad’ after the news broke.
“Kole is my childhood friend, we all grew up in Ugbokolo but when he traveled to Abuja to meet with the pastor of his fiancée, he said someone introduced him into the MMM thing but I and his babe warned him but he told us the scheme was not a scam,” the witness said.
“He invested the 300k he was saving for his wedding into the thing and was expecting to get the 30 per cent before his wedding on 28 of this month.
“This early morning, he called me to check the internet if the story of the alleged crashed of the scheme was true, I told him so I heard and he screamed and hung up.
“When I heard him, I knew it was no longer funny, so I had to rush to his house around Sabon Gari to discover that he had taken Raid insecticide. I had to call the fiancée to inform her,” he said.
ORIGIN OF MMM
Mavrodi Mondial Movement (MMM) which is also known as Moneybox was a Russian network platform that runs one of the world’s largest Ponzi schemes in history, in the 1990s. By different estimates from 5 to 40 million people lost up to $10 billion.
MMM was set up by Sergey Mavrodi, his brother Vyacheslav Mavrodi, and Olga Melnikova in 1989. The name of the company was taken from the first letters of the three founders’ surnames.
Initially, the company imported computers and office equipment. In January 1992, tax police accused MMM of tax evasion, leading to the collapse of MMM-bank, and causing the company to have difficulty obtaining financing to support its operations.
Faced with difficulties in funding its foreign trade, the company switched to the financial sector. It offered American stocks to Russian investors, but met with little success. Later, MMM-Invest was created for the purpose of collecting vouchers during privatization.
MMM created its successful Ponzi scheme in 1994 . The company started attracting money from private investors, promising annual returns of up to one thousand percent. It is unclear whether a Ponzi scheme was Mavrodi’s initial intention, inasmuch as such extravagant returns might have been possible during the Russian hyperinflation in such commerce as import-export.
The success of MMM in attracting investors led to the creation of other similar companies, including Tibet, Chara, Khoper-Invest, Selenga, Telemarket, and Germes. All of these companies were characterised by aggressive television advertising and extremely high promised rates of return. One company promised annual returns of 30,000%.
Several organizations of “deceived investors” made efforts to recover their lost investments, but Sergei Mavrodi manipulated their indignation and directed it at the government. In August 1994 Mavrodi was arrested for tax evasion. However, he was soon elected to the Russian State Duma, with the support of the “deceived investors”. He argued that the government, not MMM, was responsible for people losing their money, and promised to initiate a pay-back program. The amount ultimately paid back was minuscule compared to the amount owed.
While it was believed that Sergei Mavrodi left Russia and moved to the United States, it is possible that he stayed in Moscow, using his money to change apartments regularly and employ a group of former special agents.
Mavrodi was found and arrested in 2003. While in custody, Mavrodi was given until January 31, 2006 to read the documents in his fraud case against him (The criminal case consisted of 650 volumes, each 250-270 pages long).
At the end of April 2007, Mavrodi was convicted of fraud, and given a sentence of four and a half years. Since he had already spent over four years in custody, he was released less than a month later, on May 22, 2007.
The MMM scandal led to increased regulation of the Russian stock market, but the legacy of the fraud led many to become extremely suspicious of any joint stock companies. The current MMM Bitcoin version emerged in around 2011 following Mavrodi’s release from prison, and follows the same Ponzi structure as the original.
The exact figures are not known even to the founders. In 2011, MMM re-opened as “MMM Global” with up to 110 subsidiaries per country, it became widely popular in various African countries like South Africa , Nigeria , Zimbabwe and Kenya
What is a Ponzi scheme?
A Ponzi scheme is an illegal or fradulent investment scheme where the person or organization running it pays returns to existing investors from capital paid into it by new investors, rather than profit actually earned by the company itself.
Get reviews of the best phones, electronics and home appliances in Nigeria Typically companies running such schemes offer higher than usual profits.
Unraveling of a Ponzi scheme
According to report, when a Ponzi scheme is not halted on time by State authorities, it falls apart while the promoter vanishes, taking all the remaining investment from the particpants.
Since the scheme requires a continual stream of investments to fund higher returns, once investment slows down, the scheme collapses as the promoter starts having problems paying the promised returns. Such liquidity crises often trigger panics, as more people start asking for their money, similar to a bank run.
MMM In South Africa
In 2015 MMM began operating in South Africa with the same business model as MMM-2011, claiming a “30% per month” return 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 by Capitec Bank. In response to mounting criticism and official investigations by state authorities in 2016 supporters of the South African MMM scheme staged a protest march in Johannesburg and has started up again late November 2016.
MMM IN CHINA
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 (and as a fraudulent scheme cannot be registered).
MMM IN ZIMBABWE
MMM East Africa, launched subsidiary “MMM Global Zimbabwe” on July 2015, targeting the Zimbabwe population. MMM offered its participants “30% per month” return on all investments. It soon became widely popular in Urban areas of Zimbabwe, The Reserve Bank of Zimbabwe warned its citizens to stay clear of the program as it could be a fraudulent scheme.
On September 2016, MMM Global Zimbabwe issued a freeze on all accounts, speculations suggest that this occurred due to a fall in number of participants. On 5 September 2016, all MMM accounts were unfrozen, and members were encouraged by MMM to continue “investing” their money, however the MMM unfreeze came with a catch; Members would get an 80% loss of their available funds should they decide to withdraw their funds.
This made some participants let their funds remain in the program while others withdrew their funds to suffer an 80% loss of their money “invested”. This affected 66,000 Zimbabweans and caused some economic instability.
MMM IN NIGERIA
In November 2015, MMM launched a website targeting the Nigerian audience, also claiming a “30% per month” return including other acquirable bonuses. The entity was self-described as a “mutual aid fund where ordinary people help each other.” 2.4 million people had signed up by late 2016, with the country’s unemployed as primary targets. Nigeria’s Economic and Financial Crimes Commission has confirmed that they are monitoring the scheme. On the 13th of December, it announced the freezing of all members’ accounts due to systems overload and the negative attention brought on by the Government and mass media, leading to wide spread panic in the Nation and even attempted suicides. On the 14th of December, LASEMA (Lagos State Emergency Management Agency) of Lagos State pleaded with Lagosians to dial their emergency number if they spot anyone trying to commit suicide. LASEMA took this action, because of the number of suicides MMM caused in Russia.
Securities and Exchange Commission (SEC), warned the public on the activities of the Ponzi scheme in a newsletter tagged ‘MMM Federal Republic of Nigeria’.
The notice on SEC’s website read,
“The attention of SEC, Nigeria has been drawn to the activities of an online investment scheme tagged ‘MMM Federal Republic of Nigeria (nigeria.mmm.net). The platform has embarked on an aggressive online media campaign to lure the investing public to participate in what it called ‘mutual aid financial network’ with a monthly investment return of 30 per cent.
“The commission hereby notifies the investing public that the operation of this investment scheme has no tangible business model hence it’s a Ponzi scheme, where returns are paid from other people invested sum. Also, its operation is not registered by the Commission.”
SEC, therefore, advised the general public to be wary of the online scheme, adding that anyone that subscribes to this illegal activity does so at his/her own risk.
THE WARNING MANY NIGERIANS IGNORED
In a bid to play safe, the Ponzi scheme, MMM had clearly warned every intending participants on the risk they are willing to take and how they could lose all invested money. But clearly the promise of the 30% increase beclouded the sense of reasoning of the participants who feel the earning is worth the risk.
Below is what the MMM wrote clearly on their website :
There are no guarantees and promises! Neither explicit nor implicit.
There are neither investments nor business! Participants help each other, sending each other money directly and without intermediaries. That’s all! There’s nothing more.
There are no securities transactions, no relationship with the professional participants of the securities market; you do not acquire any securities. (Do you need them? :-))
There are no rules. In principle! The only rule is no rules. At all! Even if you follow all of the instructions, you still may “lose”. “Win” might not be paid. Without any reasons or explanations.
And in general, you can lose all your money. Always remember about this and participate only with spare money. Or do not participate at all! Amen.
Seven reason why MMM Nigeria might never come back. Below are the reasons he wrote;
(1) There’s no central account. This implies that the so called Mavros are simply electronic money. Everyone waiting to get help had provided help which they paid directly to other people in the past. They themselves argue that there’s no central account. If there’s indeed no central account where is their matured mavro? In the cloud?
(2) I believe the system calculated that the get help overwhelmed the provide help. This overload may have happened a month ago and the system had no option than to shut down.
(3) Unless new entrants provide enormous help in January, there’s no way the get help group can recoup their money and that happening is very unlikely. The only way out is for the scheme to ask those whose monies are trapped to provide help again. That’s akin to what happened in South Africa and Zimbabwe and we well know where they are now.
(4) The outrageous bonuses drained the system of money that would’ve been used to settle new entrants. But the organizers knew all along that it’s a scam so they built a long system of bonuses and cashed out. If the system was simply to help each other why the big bonuses?
(5) It’s very likely that there’s a group who don’t provide help but get help multiple times. Who can check except the site admin who will always include his cronies when matching for payment comes up. Why will they do this? Because they know it’s gonna crash.
(6) When Mavrodians started showing off their ‘wealth’ I knew the end was near. All that show off was to get new entrants but they miscalculated the number of gullible people in Nigeria. Once the limit of people who want to reap where they didn’t sow was reached, the scheme had to crash.
(7) That letter to the government was the clincher. If mmm doesn’t return in January all the blame will go to the government and the media. That has always been the scape goat in every country that mmm failed.
I loathe everything gambling. Even breweries that give millions of free drinks during promos are simply getting rid of expired stock. Telecom companies will give you 1000 percent return on your recharge but will bill the hell out of you during calls. Nothing in the world is cheap or free.