Bereng Mpaki and Rethabile Pitso
Basotho subscribers of MMM Global continued to invest in the Ponzi scheme yesterday despite the weekend collapse of Bitcoin—one of the pyramid schemes operated by MMM Global founder and convicted Russian fraudster Sergey Mavrodi.
MMM Global has taken Lesotho by storm with thousands of Basotho from all walks of life investing in the scheme which offers 30 percent returns per month on “deposits” or donations.
Although the Central Bank of Lesotho (CBL) and Consumer Protection Association (CPA) have warned the nation against investing in MMM Global saying it is illegal, Basotho continue to join the scheme and reaping handsome rewards on their donations, as the company calls the deposits.
However, after MMM Global’s Facebook page on Saturday posted a message announcing the Republic of Bitcoin’s closure because the company could not pay depositors the promised 100 percent returns, social media went crazy as local “investors” tried to find out what was going on and if their money was safe.
The Facebook message, which set social media ablaze, read: “We regret to inform you that we have to close down the Republic of Bitcoin (RB). It was an experiment and unfortunately, it failed.
“We are unable to pay the 100% interest rate per month. We can easily pay 30% per month (and we proved it in many countries) but 100% is too much even for us. That’s why the RB will be closed down. All the participants of RB-Mavro will be transferred to the MMM structure of the countries where they come from. If there is no MMM structure in a country, it will be created within two weeks from the date of this announcement. This news is not pleasant but there is nothing that can be done about it. It’s not the end of the world. We just have to wait a bit. We hope for understanding.”
However, after the weekend flurry of social media communication on the future of MMM Global, the anxiety appeared to have abated by yesterday. Investors could be seen making deposits at one of the local banks and dismissing the potential risks of MMM Global, whose founder was said to have gone into hiding after announcing BT’s closure on Saturday.
According to MMM Global members who spoke to the Lesotho Times, Bitcoin’s collapse had either been deliberately blown out of proportion by malicious media outlets or there was genuine lack of understanding of the MMM system.
“I have been an active MMM participant since it was introduced in Lesotho last year and I am well-versed with the system. Here we have an MMM system which enables people to transact using their normal currencies. There is also the Bitcoin feature which works a bit differently and that is the one which was closed, not the entire MMM system,” said one of the MMM Global members who requested anonymity.
Another subscriber said MMM Global was safe and had helped many Basotho reap handsome profits which they would have never realized at regular banks.
Another member wrote on the MMM Lesotho and South Africa Facebook page yesterday: “Mavros are green…let’s do the Mavro dance and shame the media and the banks.”
Another entry on the Facebook page read: “You frighten a person ONCE and frighten him the SECOND time. The THIRD time he won’t listen to you if all your threats don’t materialise. MMM has grown beyond any one man’s control. We are a community that serves and does not enslave other people.”
However, a local economic expert said the closure of MMM RB should serve as a warning to those who had invested in the scheme.
“The fact that one of MMM’s products has closed down suggests that all is not well within the group and the rest of its products could soon follow suit.
“This should be a warning to those who have invested money in MMM that they should withdraw the funds before it is too late,” he said.
The scheme was named after its Russian founders, Sergei Mavrodi, his brother Vyacheslav Mavrodi, and Olga Melnikova- the three Ms standing for their surnames.
It was founded in Russia in 1989, originally importing computers and office equipment. After it was accused of tax evasion in 1992, the scheme moved to financial operations, creating its successful ponzi scheme in 1994.
However, after failing to pay the required tax, the scheme collapsed in 1997, resulting in at least 50 suicides from people who had lost their fortunes. It was one of the world’s largest ponzi schemes and led to stricter regulations on Russia’s stock markets.
In 2007, Sergei Mavrodi was found guilty of defrauding 10,000 investors and jailed for four-and-a-half years.
However, in 2011, he was back with a new pyramid scheme, MMM, which he described as such. “This is a pyramid,” Mavrodi said in his appeal to the nation on his blog. “It is a naked scheme, nothing more … People interact with each other and give each other money. For no reason!”