Investors have been warned by the Chinese Government about MMM Global and MMM China. The Chinese government believe that those schemes — and sites like them — are illegal. This news comes to us from Chinese media site Caixin [via Coinfox].
What Is MMM?
MMM Global is run by convicted Russian fraudster Sergey Mavrodi who served over four years in Russian prison for a pyramid scheme he ran in the 1990s. Mavrodi recently claimed that his more recent scheme was responsible for the price increase back in December 2015 and early January 2016. He provided no evidence to back up that claim (and neither did the writers who gave him more press by parroting his claims). It seems unlikely that is true, with bitcoin’s marketcap currently sitting at over $6 billion, it would take a lot of investment to move the price as significantly as it did.
Since at least December 25th, withdraws from MMM Global have halted. As of today, users still cannot access their funds.
Nevertheless, MMM Global was successful for a while, as far as pyramid schemes go. The global version of the site, is currently listed as the #27,875 ranked website in the world, according to alexa.com.
MMM Global claims to be a mutual beneficiary network and ultimately, has very little to do with cryptocurrencies themselves. The connection only exists because MMM Global accepts bitcoin as a payment option and Mavrodi’s price claim. Nevertheless, Bitcoin does make these type of scams more effective because Bitcoin transactions are irreversible. As such, the Bitcoin community and especially Bitcoin media, should feel a responsibility to expose these types of scams as much and as quickly as possible.
A Mutual Beneficiary Network (MBN) is a new name for an old scam. Essentially a classic Ponzi scheme, MBNs attempt to piggyback off of the viral giving movements that grew in popularity a few years ago. Activities like paying the bill for the person behind you in line at Starbucks gained some press attention and it made anonymous giving sound like a real trend.
MMM claims that they are just connecting people. The idea is that you give to the network and then other people in the network will eventually give it back to you, and more. Unfortunately, with the promised returns of 20 – 100% a month, an exponential amount of new investors would have to join every month, in order for the scheme to continue. Paying out current investors with new investor money is the textbook definition of a Ponzi scheme.
The Bank of China’s warning likely comes too little, too late for investors, with the scheme rapidly falling apart. That said, it does seem that Mavrodi is quickly running out of countries to operate MMM Global in. He has recently begun targeting South Africa.
MMM Global appears larger than any other Ponzi schemes that have been linked to cryptocurrencies, but cryptocurrencies are no stranger to their own brand of Ponzi schemes. Paycoin / GAW Miners, as well as Banx Capital, show that alleged Ponzi schemes are common in new technologies like Cryptocurrencies.