Russia's top pyramid schemer makes comeback

10th January 2011, Comments 0 comments

The man who created the biggest pyramid scheme in Russia's history announced Monday that he was making a comeback with a new investment vehicle that brings in monthly returns of 20 to 30 percent.

Sergei Mavrodi said in a message on his website that he was creating an international "financial network" called MMM-2011 -- with the three Russian letters standing for "we can do anything."

"You all know my situation," the man who created the original MMM investment pyramid in 1994 said in the video message.

"I do not have the right to perform any transactions with any valuables -- with any sorts of securities," said Mavrodi.

"But we can still employ a good old principle from judo: using the opponent's strength against him," he added.

"All the transactions will only be performed between the investors themselves. I will not lay a finger on this money."

The slightly-built man with huge glasses became a Russian celebrity in the 1990s by flooding television with ads in which a middle class couple watched their MMM investment make millions as the months wore on.

The brief but omnipresent spots made a particularly strong impact because they were some of the first to be aired on Russian television as it welcomed advertisements following decades of Soviet rule.

Hundreds of thousands of Russians -- including a few high-profile celebrities -- bought "shares" of a company that unravelled once the first flood of investors tried to cash in their winnings.

A pyramid -- or Ponzi -- scheme is based on people investing increasing amounts of money in a fictitious investment mechanism that leaves them empty-handed once it eventually falls apart.

The MMM scheme soon led to the creation of almost a dozen similar pyramids whose prices became quoted on the front pages of Russian newspapers alongside the weather reports.

Mavrodi was arrested for tax evasion in 1994 but then elected to parliament later that year by a groundswell of support from investors who saw him -- and their quickly vanishing money -- as a victim of a corrupt state.

But parliament stripped Mavrodi of his immunity the following year and his 1996 bid to run for president was rejected by the central election commission.

Mavrodi was arrested on fraud charges in 2003 and released in 2007 with instructions to pay off millions of dollars in debt to investors and not involve himself in finances again.

His 30-minute Internet message explained a complicated financial mechanism in which investors trade between themselves while the value of their MMM "tickets" rises.

Mavrodi promised "regular" investors a monthly return of 20 percent "while pensioners and those with disabilities will get 30."

"Your money will increase ten-fold in a year -- count it: 20 percent every month, with that sum accumulating the entire time," said Mavrodi

Yet the 55-year-old spent most of his time explaining that what he was trading was not a share or any other security but a "fantik" -- a Russian word that translates loosely as Monopoly money.

"We will once again introduce tickets," said Mavrodi.

"They are like a unit of money -- a ticket, a share, it is all the same. But these virtual tickets -- these are not securities, they are little more than Monopoly money. They will rise in value."

© 2011 AFP

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