Thousand of people, among them civil servants and vendors, have lost thousands of dollars to fraudulent online pyramid scheme MMM Global Zimbabwe after it collapsed recently. The social financial network, which relied on an accelerating number of new members to pay off the old, abruptly terminated its services last week leaving participants stranded.
This comes as Econet’s mobile financial service platform, EcoCash yesterday distanced itself from the pyramid scheme. Participants claimed they were using EcoCash for their transactions.
Zimbabweans have in the past months been joining the online investment scheme in droves in a bid “to get rich quickly”. The Reserve Bank of Zimbabwe warned people that the scheme was fraudulent and there was no legal recourse in the event they lost their money.
The central bank said MMM, which advertises its operations through a website and recruiting agents, was not a registered or regulated entity. EcoCash yesterday said: “We have noted that some of these pyramid schemes are allegedly advertising in a manner that suggests that the Ecocash facility is a medium for prospective members to deposit their money. This is not correct.
“We advise our valued customers and all stakeholders that Ecocash is a licensed mobile payment platform that enables customers to make financial transactions such as sending money, buying prepaid airtime as well as paying for goods and services within the confines of the law of Zimbabwe. EcoCash promotes safe and legal transactions but will not be held liable for any losses arising from the use of EcoCash to engage in illegal activities such as Ponzi schemes.”
The scheme advertises itself as a mutual aid fund under which recruited members contribute money to assist others and are promised investment returns of 30 percent per month. Some of the people left counting their losses told The Herald that they received emails that the scheme had been suspended until September 15.
“All along things were moving in the right direction and we now have nowhere to claim our investments,” said Mr Tinashe Muza of Harare.
“When we started putting our funds in the scheme one could get assistance within seven days but things later changed to 14 days and when we were shut out the waiting period was 21 days. What it simply means is that the number of people in need of help has outnumbered the number of people joining. Right now we have nowhere to get our money which we invested.”
MMM stands for Mavrodi Mondial Moneybox and takes its name from its founder, Sergei Panteleevich Mavrodi of Russia. He founded MMM in 1989 and the scheme was declared bankrupt three years later leading to the disappearance of Mavrodi until his arrest in 2003.
Another victim, Mrs Rosemary Mawonde said: “We never thought the scheme would end this way as we believed that by using EcoCash to do the transactions, things were in order. I am surprised that EcoCash is also distancing itself from the scheme and it is clear that I will never recover the $300 that I invested.”
While some people who were skeptical about the scheme started with small amounts, it is believed some poured in thousands of dollars anticipating higher returns. The RBZ said the schemes were fraudulent as existing investors were ‘paid money not from genuine market investment of their funds, but from contributions made by new investors, until a point when the scheme can no longer attract new investors,”
“The participants are made aware that they make their money by recruiting new members who in turn must recruit more members,” warned the Central Bank.
Related News: CBN Warns Nigerians Against MMM, Calls It “Wonder Bank”
The Central Bank of Nigeria (CBN) has warned Nigerians to be careful of any deposit money institution that is not insured by the Nigeria Deposit Insurance Corporation (NDIC) especially the trending MMM Nigeria community.
The bank through its the acting Director of Corporate Communications, Mr. Isaac Okoroafor, made this known yesterday against the proliferation of wonder banks in the country in recent times.
Okoroafor said such deposit money institutions were dubious present Ponzi schemes.
“At times like this when the economy has suffered some decline, Nigerians should be very careful with those they deal with. Any institution that is not licensed by the CBN to accept deposits should not be given money to keep under any guise,” he advised.
He warned Nigerians to beware of the so-called wonder banks, explaining that they were makeshift institutions to dupe people.
“We can vouch for the banking system. The deposit money banks are the only licensed institutions to take deposits. If you need to deposit money in any form, go to any of the deposit money banks and put your money, you can buy fixed income instruments or invest in stocks,” he said.
Okoroafor said the CBN could not guarantee the unregistered institutions, insisting that when depositors lose money to them, the bank would not be able to help them.
“These people always come with very interesting propositions. These are fraudsters who are just out there to collect people’s money and run away as soon as they hit their target. There is no insurance because the NDIC does not even protect them against such risks when they occur,” the CBN said.
He said the CBN was intensifying efforts and liaising with the various security agencies to identify the promoters of these schemes and have such persons arrested and prosecuted, adding that anyone caught with them would also be made to face the law.
Promoters of wonder banks and other pyramid schemes in the country are currently taking advantage of the rising level of unemployment as well as the shrinking disposable income to attract unsuspecting prey.
From Lagos to Port Harcourt and some other big cities in the country, owners of these illegal businesses have been offering Nigerians mouth-watering interest rates, which cannot be found in the banking system, in a bid to attract large number of customers before they run away with huge cash.
For instance, at the Ojuelegba area of Lagos, THISDAY was recently given a small handbill advertising investment schemes that offers 30 per cent returns in 30 days.
Also, there is a new Ponzi scheme called ‘MMM’ that is spreading like wildfire. A lot of young school leavers have already signed on to this scheme, which the promoters are marketing as a “mutual fund.”
“MMM offers its participants 30 per cent growth rate per month for each and every donation they make into the system… MMM belongs to the community, its sustainability depends on the activities of the people that make up the MMM Nigeria community, that is me and you and other MMM Nigeria participants,” the promoters wrote in an online advertisement.
Typically, what promoters of such pyramid scheme do is that they offer rates far beyond what is obtainable in commercial banks. This would always attract a lot of people who would always rush in to stake their funds. But, those who join the scheme late would always be the ones to lose their shirts as they would have been convinced by those that joined earlier to invest huge amounts of money.
But experts have warned against falling for the bait of illegal deposit-taking institutions which are not licensed by the CBN, saying that their only intention is to defraud members of the public.
Recall that with the Nigerian economy is in recession, the National Bureau of Statistics (NBS) recently revealed that the country’s gross domestic product (GDP) contracted by 2.06 per cent in the second quarter of 2016, compared to the negative growth of 0.36 per cent recorded in the first quarter of 2016.
Also, national unemployment rate also rose to 13.3 per cent in the second quarter of 2016, from 12.1 in the first quarter of 2016.
