NCC Warns Consumers Against MMM
The National Consumer Commission (NCC) is warning consumers against an international pyramid scheme, now operating in our country as MMM South Africa. NCC spokesman, Trevor Hattingh explained that MMM “could very well be an outlawed pyramid scheme, where [your] monies could in all probability be lost.”
Russian convict, Sergei Mavrodi masterminded the original MMM pyramid scheme and served a 4-year prison sentence for defrauding millions of Russians out of their savings during the 1990s.
Low and behold, in 2011, the scheme resurfaced as MMM-2011!
MMM South Africa calls itself a “social finance network”, though its business model uncannily resembles that of MMM-2011. The programme promises 30% monthly returns and unconvincingly denies being a high-yield investment programme (HYIP).
A HYIP is a kind of Ponzi scheme or investment scam that promises high returns that are unsustainable.
The Consumer Protection Act
As per the Consumer Protection Act (CPA), no person may “directly or indirectly promote, or knowingly join, enter or participate in¬ a multiplication scheme.” Moreover, under the Act, an investment is defined as a multiplication (Ponzi) scheme, if it promises investors a yearly interest that is 20% over the repo rate.
As the current repo rate is at 6%, any investment promising a yearly interest of 26% or more is considered as a Ponzi scheme under the CPA. MMM South Africa promises a yearly interest of 360%! Making this scheme particularly dubious.
Not a Stokvel!
Regardless, MMM South Africa participants continue to aggressively market the scheme via YouTube, Facebook, webinars and presentations nationwide, with Mavrodi himself appearing in videos and providing “guidance”.
MMM South Africa portrays itself as a stokvel, however, it doesn’t have a central account or pot wherein participants deposit money, as one would with a stokvel.
Rather, investors are required to transfer money to anonymous members’ bank accounts. Additionally, members lack an explanation as to why their investments earn such high interest rates.
How Does the Scheme Work?
MMM South Africa operates entirely online, so transactions are difficult to track. You register on the website, log in and enter your online “personal office”. Then you are asked to “give help” and are accordingly paired up with an investor who needs “help” (money).
Next, you transfer the money to the anonymous investor, in exchange for the scheme’s own currency, namely “Mavro”. This “investment” is supposed to grow by 30% monthly.
However, the value of your Mavro will only rise if you recruit new members into the scheme. Participants are further incentivised by bonuses, which are offered for registration, referral, managers and video testimonials.
The scheme will invariably collapse one day, owing to its unsustainable design, and will leave investors out of thousands of rands, without any hope of compensation. As this is the way all pyramid schemes turn out, so don’t be tempted by a quick buck!