MMM Global has closed down the “Republic of Bitcoin” (RB), following the revelation that it was not able to pay monthly returns of 100%, while South African members of the self-proclaimed “social financial network” are complaining that their Mavro (the internal currency of the system, not to be confused with mojo) has been frozen.
Meanwhile, the founder of MMM, Sergey Mavrodi, a convicted Russian criminal who served jail time for fraud, allegedly executed his exit strategy a few weeks ago.
Over the weekend, MMM Global announced on its Facebook page that the RB “was an experiment, and, unfortunately, it failed”.
In South Africa, MMM advertises potential growth of 30% per month on deposits, which is in contravention of the Consumer Protection Act (CPA). In terms of the Act, a “multiplication scheme” – more commonly known as a ponzi or pyramid scheme – exists when an effective annual interest rate 20% above the repo rate is promised to investors.
Offering a potential annual interest of 360%, MMM is clearly in contravention of the maximum 27% that can be offered in terms of the CPA.
Following an investigation by the National Consumer Commission (NCC) – the guardian of the CPA – in 2015, the Hawks have since opened an enquiry. “Our challenge is jurisdiction since everything is done through the internet,” Hawks spokesperson, Hangwani Mulaudzi told Moneyweb.
“Another challenge is there are no cases opened by investors, which is a setback to the ongoing enquiry. We call upon them [investors] to come forward; we are here to help,” Mulaudzi said via emailed responses.
The specialised commercial crimes unit has enlisted the help of Crime Intelligence, the SA Banking Risk Information Centre (Sabric) and the Financial Intelligence Centre (FIC), he noted.
What now for investors?
According to MMM Global, all the “RB-Mavro” will be transferred to the MMM structure in participants’ respective countries. “If there is no MMM-structure working in this country, it will be created within two weeks from the date of this announcement,” the statement explained.
It is not clear how such a structure will be established, particularly since MMM has been at pains to insist that it operates without intermediaries and enables participants to transfer money directly to each other. Even if such a structure is created, participants will no longer be able to use the now “old” RB-Mavro in their “personal office”, effectively their MMM bank account.
Old Mavro will be paid back as the MMM networks develop further in each country, according to the statement, a practice that has been previously tested and usually takes about six months. “This news is not very 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, Administration,” the statement reads.
Some local members, meanwhile, complain that their Mavro has been frozen and support staff is doing little to assist them. One individual claims that accounts to which his ‘team members’ were directed to pay money didn’t exist.
According to the local administrators, however, South Africans who participated in RB will be moved to MMM South Africa and carry on as usual. “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,” the MMM South Africa Facebook page administrators told this journalist via Facebook Messenger.
“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,” they insisted.
Where is Mavrodi?
Mavrodi has made no comment on the latest developments in his MMM scheme, prompting a website that investigates multi-level marketing schemes to suggest that he has fled.
Traditionally communicating with local investors via weekly YouTube videos, Mavrodi announced on March 20 that because the MMM system was developing so well, “from now on I won’t be recording video messages weekly”.
“Of course, if there are situations requiring my comments I will make my video messages, otherwise – in order to show up on the screen for two minutes – it seems there’s no point in it.”
Clearly, Mavrodi does not believe that investors require any assurance from him following the shutting down of the Republic of Bitcoin and the ramifications of that for investors (or the alleged frozen Mavro for that matter). As always, he signed off his last YouTube clip with the customary message, “As well, I believe that the financial apocalypse is inevitable. Together we change the world.”
If video testimonials are anything to go by, some MMM members appear to have made oodles of boodle off the scheme, with donations upwards of R40 000 flying between members. Armand from Johannesburg is the latest to post his testimonial on the MMM South Africa Facebook page, saying that he requested “help” of R32 000, which was promptly deposited into his bank account leading to him ‘enjoying life now more than ever’.
While that may be true for a number of MMM members, of grave concern is the countless others who may now lose money in the apparently faltering scheme.
- Money Web