Bitcoin-backed ponzi scheme orchestrator Sergey Mavrodi goes missing after MMM Global fails

A South African Bitcoin-backed ponzi scheme which has been allegedly orchestrated by a Russian convict by the name of Sergey Mavrodi collapsed during the weekend.

The scheme, which operated under the names of MMM South Africa and MMM Global, is one of nine companies which are now being investigated by the Specialized Commercial Crimes Unit of the South African Police Service for their part in an alleged ponzi scheme which, according to the police, duped members into donating money to others in return for a bitcoin-linked virtual currency called Mavros.

In doing this, MMM Global promised its customers that they would gain a 30% return on their ‘investment’ which was deposited in South African rand.

This practice shows the signs of a ponzi scheme, in that the rate of anticipated return is over 20% higher than the repo rate which in South Africa is 7%.

Sergey Mavrodi goes on the run

Mr. Mavrodi is now thought to be on the run, having allegedly disappeared following the demise of MMM Global.

BehindMLM, a portal focusing on multi-level marketing schemes and affiliate marketing, stated that Mr. Mavrodi “executed his exit strategy a few weeks ago. On March 20th Mavrodi informed investors there would be no more news updates published to the MMM Global website”.

The last message from Mavrodi stated:

“We regret to inform you that we have to close down the Republic of Bitcoin. It was an experiment, and, unfortunately, it failed.”

The last Facebook entry on MMM Global states. “We turned out not to be able to pay 100% per month.”

Absolutely no sign of Mr. Mavrodi’s whereabouts has been reported since the demise of MMM Global, however BehindMLM reported ““It’s highly likely he withdrew and/or transferred out as much of the money he stole from investors before fleeing.”

The news became international, as Britain’s mainstream news source The Financial Times reported on Monday that, while it is yet to confirm with its sources that are close to Mr. Mavrodi, “if internet reports are anything to go by it looks like Mavrodi’s latest scheme … dubbed a ‘mutual aid social network’ … collapsed over the weekend, with thousands of investors (a lot of them in emerging markets) locked out of investment accounts they had been promised would yield them 100% returns per month”.

MMM Global’s South African entity, MMM South Africa has refuted the claims that it was a Ponzi scheme or that it was collapsing on Monday this week. A Facebook post which was constructed as a message to Fin24’s newsdesk on Monday this week stated

“In the MMM community there are many different countries. One of them was the Republic of Bitcoin. It was a ‘synthetic’ country which united participants from many different countries who provided and received help with Bitcoins.”

Whilst in the vast majority of cases, Bitcoin has now elevated its status toward the institutional world, having attracted hundreds of millions of dollars in investment from large global financial institutions to develop Blockchain technology and fuel the research and development of Bitcoin related technology that can be applied to many other FinTech enterprises, the dark days of Silk Road and MtGox being a distant memory, it is clear that there are still some examples of nefarious uses, which are yet to be ironed out.

Image – Charles Ponzi, whose name is now used to describe schemes which promise high payouts and ultimately collapse