The money ponzi scheme - MMM - has continued to attract many Nigerians as its popularity soars.
Despite Security Exchange Commission and Central Bank of Nigeria’s
warning that Nigerians should steer clear of the Mavrodi Mundial
Movement (MMM) scheme, the number of subscribers has continued to climb
and the scheme has become the current number one investment for many
Nigerians in recent times.
The scheme pays over 30 percent on investment to subscribers in one
month while giving them numerous bonuses for bringing in new
investments. This of course looks like the ‘wonder banks’ of the 90s
that crashed with billions of Naira belonging to investors disappearing
with them.
Yet Nigerians continue to put their fate in MMM. It is now even being preached in some churches as a good source of investment.
A look into the scheme has revealed the reason why the scheme is
working and why people are very much attracted to it. It also uncovers
flaws and reasons why it may crash.
The Mavrodi Mundial Movement was instituted in Russia in 2011 by a
mathematician and statistician named Sergey Mavrodi. He had created an
algorithm that allows subscribers to have a huge purse of funds where
they can draw from as long as new subscribers are willing to fund
whatever was taken out.
It is more like a Ponzi scheme or a pyramid scheme but with a
twist. A Ponzi scheme collects funds from investors and use the funds of
new subscribers to pay old subscribers and when there are no new
subscribers the scheme breaks down. Same goes for Pyramid schemes, but
MMM is bit different.
How MMM Works
MMM organises interested participants on a networked platform. It
matches people who are willing to assist or fund others with people who
need funds. The amount you are able to ask for in funding depends on the
amount you are able to assist people with. It allows one to give out
fund to people with the assurance that they will get assistance when
they request for it.
MMM simply make new ‘helpers’ to transfer money (help as they call
it) to other people who had provided help previously to earlier
participants and the circle continues. But it is not really a circle and
does not go round, instead it is a pyramid that keeps going up and this
may have consequences on the long run.
If you accept to provide help of N100,000, the bank account of
either one person who requested for help of N200,000 or a number of
people whose total request is N100,000 will be sent to you to pay the
money into, which you have to pay. Paying this money will allow you to
be qualified for ‘help’ as well. But it goes more than that. Paying
N100,000 you get N130,000 as help.
Here is how the extra N30,000 is derived. Once you have the
N100,000 in the system, you earn 1percent of your investment every day.
In 30 days that make the N30,000. But the money is actually not an
interest.
All monies on the scheme is called ‘Mavro’. So your N100,000 is
converted to 100,000 Mavro. Each Mavro is not really money, but a unit
of trust or a unit of ‘helperbility’. So for you to leave your 100,000
in the scheme, you earn 1% on your helperbility. Meaning the more you
are willing to help the more help you can get. This helperbility you
earn can now be converted to Naira at N1 to 1Mavro.
However, it is not necessary at all to wait for a month. Help can
be requested at any time. But only after confirmation of your Mavro. One
gets confirmed after actually transferring money to someone who needs
assistance.
The scheme goes on and on as long as there are more people to give out their money to people who need it.
Government Intervention
Since it’s became popular earlier this year, government has tried
to dissuade Nigerians from participating in the scheme. They have issued
numerous warning telling Nigerians that the scheme is a scam that will
crash in future.
Director of Corporate Communications, CBN, Mr. Isaac Okoroafor,
says MMM is a Ponzi scheme. “At times like this when the economy has
suffered some decline, Nigerians should be very careful with those they
deal with. Any institution that is not licensed by the CBN to accept
deposits should not be given money to keep under any guise. We can vouch
for the banking system. The deposit money banks are the only licensed
institutions to take deposits. If you need to deposit money in any form,
go to any of the deposit money banks and put your money, you can buy
fixed income instruments or invest in stocks,” he said.
Okoroafor said the CBN could not guarantee the unregistered
institutions, insisting that when depositors lose money to them, the
bank would not be able to help them.
According to the Security Exchange Commision (SEC), the venture had
no tangible business model, describing MMM as a Ponzi scheme, where
returns would be paid from other peoples’ invested funds.
“Ponzi scheme is a fraudulent investing scam promising high rates
of return with little risk to investors. The scheme generates returns
for older investors by acquiring new investors and will later crash,”
the Commission’s site reads.
So the question is, why is the government not doing anything about it if it is considered dangerous?
The answer lies in the model of MMM. It has no physical or tangible
asset. The whole business model relies on the internet and mutual trust
between subscribers. So it is difficult for the government to halt
their operations or have any control over them. Blocking MMM is just
like blocking Facebook or any other site. Also, users are already
informed that they are sending out money on their own accord.
The Growing Users
Despite all the warnings, MMM users continue to grow in number.
Even MMM managers clearly states on their website that there is no
guarantee of getting back your money after you have provided help yet
the system is well designed in such a way that you provide help before
you can be helped.
Meaning when your money is in, there is no 100 percent security
guarantee that you will get your money back. Though for now it is
working, there is no assurance it will in future.
Despite this, many continue to harp on the scheme, even those who
are meant to know better. From studies, members with the highest funds
in the scheme are in the banking sector. And they even encourage others
to go into it.
Shade, who works in a first generation bank and does not want her
surname released, says that MMM is her biggest investment till date and
she now makes money from her profit from the scheme. “I was one of
the early people on MMM. I have a client who keeps bringing in huge sums
every month. She later introduced me to MMM. I started with just N5,000
and in less than two weeks I was able to get my money back with
interest. Now I have millions in it,” she says.
When asked if she is not afraid that the scheme may crash, she has this to say, “If
it crashes tomorrow, I will not lose a kobo. I started with N5,000 like
I told you and later put in over N250,000 of my own money. Today I
operate in with millions.”
A new subscriber, John Eyighator, says that he is joining the scheme just because everyone is doing it.
“My colleague made N300,000 last week and I have heard many other
people that are saying good things about it. No bank can give me that
kind of money, so I decided to try it. I put in N100,000 this week,
immediately they confirm me, I should be able to make over N60,000.
These are just a few of those we spoke to who all have
something positive to say about the scheme. However, there should be a
source for concern.
Unanswered Questions
There are some things about MMM that does not add up, which
subscribers should be aware of. Firstly, Mavrodi Mundial Movement is not
registered as a company in Nigeria. If a company is helping others
legally then they should not find it difficult to register the company
and even have an office.
However, a user countered this point. According to Ity, solutions
owner who is also a ‘Guardian’ (people with large number of subscribers
under them) with MMM, he says “As for MMM not being registered legally,
you should know that MMM is a donation system, there is nothing illegal
about donations. All monies are being transferred peer-to-peer.” He asks
that his name is not published.
Secondly, it is not explained where that 10 percent that is given
to new subscribers comes from. The scheme is pretty simple, but there
is the question of where the funding for the 10 percent given to first
time users comes from. It only means that the operators of MMM are also
involved one way or the other.
Also, when we looked into the history of the founder of the scheme,
Sergey Mavrodi, not much can be said about his financial history. The
only thing positive to his credit is that fact that he is a very good
mathematician.
Apparently, MMM is not the first scheme that Mavrodi has created.
He founded the first scheme in 1989 but it later crashed and was
sentenced to prison. He was then elected a local council member in
Russia while in prison so he was released due to the immunity he got
from his election. Mavrodi declared MMM bankrupt on December 22, 1997,
then disappeared, and was on the run until his arrest in 2003.
Wikipedia also said he was deported from USA for fraudulent
dealings and in 2007, a Moscow court sentenced him to four and a half
years in a penal colony. The court also fined him 10,000 rubles ($390).
In January 2011, Mavrodi launched this current pyramid scheme
called MMM scheme which has lasted till today. This time, he targeted
third world countries including India, Latin America and countries in
Africa including Nigeria. Today, Nigeria has the highest number of MMM
subscribers in Africa.
Also, subscribers need to be afraid that the scheme may well be on
its way to a big crash. This is because it has already crashed in
Zimbabwe and many lost all their life savings. This is reminiscent of
what happened in Russia.
Finally, one also needs to be weary of organisations that refuse to
speak to the press. For this story, Independent tried to reach the
people in MMM through their website. We even asked a lady called Tonia
who was responding cto us thinking we wanted to subscribe. But she later
stopped responding when we introduced ourselves as the media.
If MMM has nothing to hide, they should hold a press conference, or an event letting Nigerians know the faces behind the scheme.
A financial analyst, Ben Agbakoba says that such schemes can only
thrive in third world countries like Nigeria because many people are
poor and are looking for get rich quick schemes. He says the scheme will
work for a while but will eventually crash.
“They are only taking advantage of our poor economy. Such
schemes cannot work if Nigerians are well off. It is hard to tell
Nigerians to stop patronising the scheme. If we say so, the scheme will
crash. And if it continues, it will still eventually crash. But people
will prefer not to know exactly when it will crash. I think they should
continue, after all, they all know the risks involved,” says Agbakoba.
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