MMM (Ponzi scheme)
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| Industry | Office Equipment importer (1989-early 1990s) Ponzi Scheme initiator (1992 onwards) |
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| Fate | Shut down by Russian police in 1994, declared bankruptcy in 1997, reopened in 2011 targeting almost 110 countries. |
| Founded | 1989 |
| Headquarters | Russia |
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Key people
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Sergei Mavrodi |
МММ was a Russian company that perpetrated one of the world's largest Ponzi schemes of all time, in the 1990s. By different estimates from 5 to 40 million people lost up to $10 billion. The exact figures are not known even to the founders. In 2011, MMM re-opened as "MMM Global" with subsidiaries in up to 110 countries; it became widely popular in various African countries like South Africa, Nigeria, Zimbabwe, Kenya and Ghana with some attributing this popularity to poverty and poor government regulation or law enforcement.
MMM was established in 1989 by Sergei Mavrodi, his brother Vyacheslav Mavrodi, and a woman Olga Melnikova. The name of the company was taken from the first letters of the three founders' surnames.
Initially, the company imported computers and office equipment. In January 1992, tax police accused MMM of tax evasion, leading to the collapse of MMM-bank, and causing the company to have difficulty obtaining financing to support its operations. Faced with difficulties in funding its foreign trade, the company switched to the financial sector. It offered American stocks to Russian investors, but met with little success. Later, MMM-Invest was created for the purpose of collecting vouchers during privatisation. This effort was similarly unsuccessful.
MMM created its successful Ponzi scheme in 1994. The company started attracting money from private investors, promising annual returns of up to one thousand percent (1,000%). It is unclear whether a Ponzi scheme was Mavrodi's initial intention, in so far as such extravagant returns might have been possible during the Russian hyperinflation in such commerce as import-export.
MMM grew rapidly. In February 1994, the company reported dividends of 1,000%, and started an aggressive TV ad campaign. Since the shares were not quoted on any stock exchange and the company itself determined the share price, it maintained a steady price growth of thousands of percent annually, leading the public to believe its shares were a safe and profitable investment.
An important factor in the scheme's success was word of mouth, but most of the company's success came from its extremely aggressive ad campaign, which appealed to the general public by using "ordinary" characters that viewers could identify with. The most famous of them, a "folk hero" of early 1994, was Lyonya Golubkov. Another notable marketing effort was a giveaway of free Metro trips to all Moscow citizens on a particular day. MMM also was one of the first well-known companies in Russia with a logotype and slogans ("Flying from shadow to the light" and others).
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Wikipedia