How MMM Works, the Myth, Truths and Risks Nigerians are Taking

Over the few weeks, Nigerians have been inundated with
reports about the dangers of ponzi scheme, Mavrodi
Mundial Movement. Here is what you need to know

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 for example,
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 One percent on
your investment every day. In 30 days that makes 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 back 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 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 and it 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 USER
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 and that
was all I put into it. Today I operate it 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 extra.
These are just a few of those we spoke with 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 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 he 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 position. 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 wary of organisations that
refuse to speak to the press. For this story, Hazeez
Balogun tried to reach the people in MMM through their
website. He even asked a lady called Tonia who was
responding to him thinking he wanted to subscribe. But
she later stopped responding when he introduced
himself as a media person.
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.

Culled from The Independent