The notice on SEC’s website thus read, “The attention of SEC, Nigeria has been drawn to the activities of an online investment scheme tagged ‘MMM Federal Republic of Nigeria (nigeria.mmm.net). The platform has embarked on an aggressive online media campaign to lure the investing public to participate in what it called ‘mutual aid financial network’ with a monthly investment return of 30 per cent.
“The commission hereby notifies the investing public that the operation of this investment scheme has no tangible business model hence it’s a Ponzi Scheme, where returns are paid from other people’s invested sum. Also, its operation is not registered by the Commission.”
SEC, therefore, advised the general public to be wary of the online scheme, adding that anyone that subscribes to this illegal activity does so at his/her own risk.
Origin of MMM
What is a Ponzi scheme
Initially the promoter will pay out high returns to attract more investors, and to lure current investors into putting in additional money. Other investors begin to participate, leading to a cascade effect. The “return” to the initial investors is paid out of the investments of new entrants, and not out of profits. Often the high returns encourage investors to leave their money in the scheme, with the result that the promoter does not have to pay out very much to investors; he simply has to send them statements showing how much they have earned. This maintains the deception that the scheme is an investment with high returns.
Unraveling of a Ponzi scheme
When a Ponzi scheme is not stopped by the authorities, it sooner or later falls apart for one of the following reasons.
- The promoter vanishes, taking all the remaining investment money.
- Since the scheme requires a continual stream of investments to fund higher returns, once investment slows down, the scheme collapses as the promoter starts having problems paying the promised returns (the higher the returns, the greater the risk of the Ponzi scheme collapsing). Such liquidity crises often trigger panics, as more people start asking for their money, similar to a bank run.
- External market forces, such as a sharp decline in the economy (for example, the Madoff investment scandal during the market downturn of 2008), cause many investors to withdraw part or all of their funds.
Reasons Why MMM Nigeria may be fradulent
- The promise of a 30 % ROI is outrageous and not in terms with standard rates of investment (Example one makes a profit of 30,000 naira for every 100,000 naira invested in the system in 30 days , excluding additions that comes from referral, signing up and testimonial bonuses) No legal financial company can offer you that investment plan.
- Such “Return on Investments” been paid to older clients are money received from new clients and the circle continues, the 30% is never made from company profits. That is why there is aggressive ad campaign from the company(MMM Nigeria) paying massive additional bonuses to recruiters that they call guiders to conduct seminars and deceive gullible Nigerians into joining the scheme to keep the system alive.
- The CEO of the company(MMM Nigeria) Seigei Marvrodi is a convicted fraudster and had run similar fraud schemes in Russia where he defrauded investors over a hundred billion dollars.
At this point it is pertinent to be weary of these kind of Ponzi scheme which promise too much to be true, while many Nigerians will continue to defend the scheme, according to many #MMMPays, yes it may pay now, but just like every other fraud, it strikes at a moment the investors express much confidence in their venture. So Nigerians should be wise and avoid unrealistic business ventures like MMM Nigeria.
In January 2016 the Chinese government banned MMM on the grounds that it is a pyramid scheme, (Ponzi scheme), and it is not registered in the country (and as a fraudulent scheme cannot be registered