Many people have been warned especially Nigerians to be wary of the popular Ponzi scheme called Mavrodi Mundial Movement (MMM) after the same scheme crashed in China which forced many investors to lose cash worth millions in the country.
Investigation revealed that a report by Chinese site Caixin, showed how the scheme crashed in the country and how many of the investors lost their money. While revealing details of their loss, several investors told Caixin that the website closed in December, freezing their accounts without warning.
A December 25 announcement on the website said investment cycles and interest payments would be calculated differently in the future, and all previous requests for withdrawals had been disregarded.
Investors could still not get into their accounts as of January 19, the system had crashed forcing many to lose millions they had invested in the Ponzi scheme. One investor said he’d asked the police to probe MMM China but was unheeded.
The police could not want to investigate because MMM and its Chinese operations are not registered in the country.
However, it was gathered that the Chinese Government had earlier warned its citizens against investing in the scheme but they refused to heed the warning and went ahead to invest, just the way the Nigerian Government and CBN had warned Nigerians from investing into the scheme.
In a report by Caixin, Chinese Government counseled the public that a Russia-based investment website and others like it are illegal because they are running what appear to be pyramid schemes.
The Chinese arm of MMM, which was founded by a Russian ex-con named Sergei Mavrodi, presents huge risks to investors because it is operating illegally in the country and may have channeled funds abroad, according to an announcement on January 18 from the central government.
The warning said MMM China is among an emerging number of unlicensed organizations that aim to attract online investors with promises of high returns while employing a business model that looks to be a Ponzi scheme.
The websites often advertise themselves as platforms that facilitate “financial mutual assistance” to each other rather than investment services, the announcement said, and they encourage existing investors to invite others by rewarding them with money from the newcomers.
It also said these groups change their websites frequently and none of them was registered with the government.
“Such operating models present huge investment risks and their capital flows are not sustainable,” the warning said. “Once the capital chain breaks, investors will face severe losses.”
The announcement was published by China’s central bank, the banking regulator, the Ministry of Industry and Information Technology and the State Administration for Industry and Commerce.
The government notice said MMM’s founder, Mavrodi, served 4½ years in prison because he used it to defraud investors. After his release, he “resumed his old practice to carry out fraud,” the notice said.
All eyes will be on Nigeria since MMM scheme administrators froze all accounts of its members for one month. Many people will be waiting eagerly for the scheme to reopen, however if it doesn’t more disastrous news will be heard in the days ahead.