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With the
current high rate of unemployment, job losses and pressing financial needs in
the country, it is not surprising that the youth are embracing questionable get
rich quick schemes and opportunities. For instance, the number of Nigerians
that now patronize the popular lottery games is on the increase.
Some youths
are also deeply involved in sport betting through such platforms as Nairabet, Merrybet and Bet9ja,
among others. It is against this backdrop that the MMM Federal Republic of Nigeria made a grand entrance into the
Nigerian investment market in 2016.
MMM stands for Mavrodi Mondial Moneybox
and takes its name from its founders, Sergei
Panteleevich Mavrodi, Vyacheslav Mavrodi,
and Olga Melnikova.
The outfit was established in 1989 by these three Russian nationals, and
promises its clients 30 per cent return on investment (ROI) for money put into
the system for 30 days.
The scheme
prides itself as a mutual aid fund through which recruited members contribute
money to assist others. The founders claimed they are not into banking, online
business, Investment Company or a multi-level marketing (MLM) program.
The scheme
structure, however, indicates otherwise. For instance, members can have
multi-level structures under them and receive bonus from each donation of every
participant in their structures.
The company has been able to persuade many
Nigerians to buy into its idea. Many Nigerian big online Business coaches and
entrepreneurs with vast subscriber base are encouraging their followers to key
in to the MMM opportunity.
Thus, some
Nigerians have invested millions of Naira into this scheme and are enjoying
their newfound wealth. Reports has seen screenshots of money many claimed to
have earned from the scheme.
According to
one such subscriber, Babajide Abayomi, MMM
ensures a level playing ground for all. And with it, people don’t have to be
under the yoke of the banking system, which demands that huge interest be paid
on loans. He said MMM is real and
safe.
However, the
question some have asked is:
How long would it take to sustain the
profits?
Many still
remember vividly the mad days of the Wonder banks in the early 2000s. Then,
many lost their hard-earned money to the likes of Pennywise and such other
scammers. To really grasp the risk involved in investing in this type of
scheme, a study of the founders’ backgrounds provides good insights into the
viability of their outfit.
According to
Wikileak, the online information library, МММ
was a Russian company that perpetrated one of the world’s largest Ponzi schemes
in the 1990s. By different estimates, between five and 40 million people lost
up to$10b. The website said the exact figures of money lost are not known, even
to the founders.
The site
described Sergie Mavrodi as a Russian criminal and a former deputy of the State
Duma in Russia. According to it, he is the founder of the МММ series of pyramid schemes. Wikileak reported that in 2007,
Mavrodi was found guilty in a Russian court of defrauding 10,000 investors out
of 110m rubles ($4.3m).
Wikileak
reported: “In January 2011, Mavrodi launched another pyramid scheme called MMM-2011, asking investors to buy
so-called Mavro currency units. He frankly described it as a pyramid, adding,
“It is an unclad scheme, nothing more … People interact with each other and give each other
money. For no reason!”
Mavrodi said his goal for launching MMM-2011 is to destroy the current
financial system, which he considers unfair, and form something new to take its
place. “In 2011 he launched a similar scheme in India, called MMM India, again stating clearly that
the vehicle is a pyramid.
He has also launched
MMM in China. He was reported to be
trying to expand his operations into Western Europe, Canada, and Latin America.
“In 2015, MMM began operating in
South Africa with the same business model as MMM-2011, claiming a “30 percent per month” returns 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 January 2016, the
Chinese government banned MMM on the
ground that it is a pyramid scheme, (Ponzi scheme), and not registered in the
country.
Earlier this
year, the scheme crashed in South Africa. MMM
Global only gave South Africans the bad news with a post on its website saying:
“We regret to inform you that we have to close
down the Republic of Bitcoin. It was an experiment, and, unfortunately, it
failed. We turned out not to be able to pay 100 percent per month.”
Also
recently, the scheme collapsed in Zimbabwe. One of the victims, Mrs. Rosemary
Mawonde was quoted by Breaking Times, saying: “We never thought the scheme
would end this way, as we believed that by using EcoCash to do the
transactions, things were in order.
I am
surprised that EcoCash is also distancing itself from the scheme and it is
clear that I will never recover the $300 that I invested.”
What then is a Ponzi scheme?
The scheme
(also a Ponzi game or a Ponzi) is an investment operation, where the operator,
an individual or organisation pays returns to its investors from new capital
paid to the operators by new investors, rather than from profit earned through
legitimate investments.
Operators of
Ponzi schemes usually entice new investors by offering higher returns than
other investments, in the form of short-term returns that are either abnormally
high or unusually consistent. Initially, the promoter would pay out high
returns to attract more investors, and to lure current investors into putting
in additional money.
Other
investors would begin to participate, leading to a cascade effect. The “return”
to the initial investors is paid out of the investments of new entrants, and
not out of profits. Often, the high returns encourage investors to leave their
money in the scheme, with the result that the promoter does not have to pay out
very much to investors; he simply has to send them statements showing how much
they have earned.
This
maintains a semblance that the scheme is an investment with high returns. The
Securities and Exchange Commission has warned the public about the activities
of the scheme on August 30 of this year. According to its website, SEC said:
“The attention of the Securities and Exchange Commission, Nigeria (SEC) has
been drawn to the activities of an online investment scheme, tagged ‘MMM Federal Republic of Nigeria (Nigeria.).
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 percent.
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’s invested sum. Also, the Commission
does not register its operation.
The general
public is hereby advised to distance itself from this online scheme. Please
note that anyone that subscribe to this illegal activity does so at his/her own
risk. Managing Partner, Two-Edge Partners Global Limited, Olajide Alex-Oni said such scheme is usually targeted at the Extremely
Poor, Greedy and Desperate people of the society.
He said:
“The get rich quick scheme usually comes out looking so attractive to the
populace, but like what is, it is robbing Peter to pay Paul! “ When a company
encourages existing investors to invite other potential investors by rewarding
them with money from these new comers, then what do you call that?
Such a model
is not sustainable and is a highly risky investment, because once the flow of
investors and their funds stop flowing into the scheme, the investors will most
definitely suffer unimaginable losses.” Speaking on MMM operations, he said a number of countries around the world have
banned this scheme and Nigeria should equally do the same.
He said
since SEC has warned Nigerians on the activity of this group, it is, therefore,
illegal to invest in them, because their model is a typical pyramid scheme. He
explained that the scheme was not licensed to operate in Nigeria, noting that
its operations are online based, which can crash or get closed down
unannounced.
He said it’s
designed to attract huge traffic and promises unconventional high returns on
investment. Speaking further, Alex-Oni warned: “People have to be careful of
such schemes, because they claim to be foreign investor driven with amazing success
stories, thus the attraction for the ignorant.
The ignorant
in this case are usually aware of the risk involved, but the greed in them let
them take such risk with the hope to exit before the scheme crashes. “It is
also quite sad that in some extreme cases, some investors actually commit their
entire life savings into these kinds of Ponzi schemes.
People
should learn to get creative and innovative through hard work and smart
thinking and start creating values and ideas that money will chase. That way,
you may start small, but you will think big to grow big the proper way.
A warning is
enough for the wise.” MMM is a risky
game.......
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