How MMM & Other Ponzi Schemes Work

I know fans of pyramids and network marketing are going to yell for my head but sometimes the truth has to be told. Can it be possible that Sergey Mavrodi set up a website to help people make money for free? That is highly unlikely but how does he then cash in seeing he only "facilitates" people helping each other?

1. Mavrodi set up a website then built a team using people who are bought into the idea of easy money. Just how many the people in his team are depends on his target reach in terms of money. Maybe 1000 spread across small business people and simple people who know the streets. These are the people who cash out of the system.

2. ‎He then marked these people with special accounts (super users) only he can see at the back end of the website. He can top up their MMM accounts with non-existent money balances to allow them to withdraw bigger amounts e.g. someone gets R25,000 on their account without putting a cent. ‎They provide help to another of their inner circle. Meaning this person is due R25,000 plus interest of 30%.

3. ‎The owner of the scheme has insight into everything while the people have no information whatsoever. If you go to the Facebook page of MMM you can identify some of these super users assuring restive members that they must be patient. Think about this, it's easy to put money into it but when it comes your turn to get something out you must wait in a long queue.

4. If you go to the MMM website as a new person immediately you can chat to someone to help you join. But if you have joined and get blocked due to one of their rules (unfair) you can wait for up to three months without access to the system and your money. If you give someone money and they don't confirm that you gave them, you can be blocked. If you are asked to give someone money and take time to do it you can get blocked this despite having put money to join. Can't those people who are quick to make people join be quick to help unblock people? Of course they can but the more people get locked out of their money the better for the system.

5. The interest paid is designed to keep you inside waiting for your big payday which will never come. A poor person with R3000 to invest is likely to keep it in reinvesting to get the level of buying a car or a house, it's a chance of a lifetime right? Wrong! You end up losing maybe R50,000 in growth money along with your initial investment. If you see the spreadsheets shared by some of the people, R10,000 can easily grow to a million in a few years.

Easy Come, Easy Scammed!

Now they ask people to join paying in money. Think about it, how much money is being pumped into MMM everyday? Nobody knows except Mavrodi himself and his inner circle. Now suppose harmless people put in R500,000 in one week as help provision, they then wait for their turn to ask for help ‎with interest usually after a month and three weeks waiting period. This R500,000 MMM will pay most of it to its super users maybe R400,000 then the balance to the genuine people.

Now the reason I mentioned small businesses among the 1000 is for the sole purpose of cashing out large sums of money. Imagine an individual earning R5,000 suddenly getting R40,000 into their bank account, the bank's anti-laundering & theft warning will trigger an alert. Already one MMM person mentions how Capitec questioned him a lot about his deposit. This could be part of law enforcement, as they say, to identify the misdemeanours "follow the mon‎ey. The small businesses come in handy because businesses can move substantial amounts of money without attracting police eye. So the money moves from mostly poor citizens into MMM then out through Mavrodi's inner circle probably being made legitimate by the small businesses that accumulate it into real assets like houses and buildings.

The problem comes when few people join; as seen with Kipi. There is only so many people willing to put money into a ponzi scheme and when these are finished then be prepared for the worst. As inflows dry there will not be reason to keep it going. Many people have money trapped in Kipi hoping to get something out. The word from the owners is that the system was hacked and people's money wiped out of their accounts but the truth is they wiped it and shut down the system. Another reason used is that there was interference from law enforcement causing collapse, this blaming someone makes it easy to setup another ponzi as in the eyes of the gullible and greedy public, the ponzi owners can do no wrong. Already the Hawks are hard at work identifying people who are participating in these schemes and people using Capitec seem to be the first targets with reports of many accounts frozen. Then the account owners would be charged for tax evasion and participation in ponzi schemes, that's a lot of heartache especially if SARS put punitive measures.

Overall the poor people are losing money to a well-orchestrated scheme pouring their earnings which are being siphoned on the other side by Mavrodi and his people. If today the MMM scheme is to be told to pay people back their money who provided help without getting anything in return, there will not be such money or even one quarter of it.‎ As I write this MMM website is not accessible, after checking I learnt that there is a new domain name. Probably the change in domain is to evade law enforcement and frustrate investigation of the scheme. Whatever is done the biggest losers will be those who are borrowing from banks to join the schemes. With bank accounts being shut down some might end up being dragged into courts and incur criminal records, some will be blacklisted and others with sensitive employers will lose their jobs. Humans will never learn though, once the demons of greed and quick riches appear they stumble into it. I like a proverb which says, "the wise see danger and conceal themselves, the simple walk in and lose out.