Sergey Mavrodi, who has been running the online money doubling scheme, died on Sunday of a heart attack.
The fate of a Kenyan pyramid scheme run by a convicted Russian fraudster is in a limbo following his death in Moscow.
Sergey Mavrodi, who has been running the online money doubling scheme, died on Sunday of a heart attack, leaving thousands of his victims holding worthless points and bitcoins – and hundreds of millions of shillings lost.
While the scheme had collapsed in several countries, MMM-Kenya, which is the local affiliate of MMM Global, continued to lure thousands of people to pay money to online strangers.
MMM stands for Mavrodi Mondial Moneybox and takes its name from the Russian founders – Sergei Mavrodi, Vyacheslav Mavrodi and Olga Melnikova.
The Ponzi scheme was first exposed in the Nation last year.
Run by a well-known Russian swindler and con artist who was once jailed in Russia for the same fraud, MMM first came to prominence in 1997 when Mavrodi created the biggest finance pyramid in Moscow before it collapsed.
Media reports say the 62-year-old Mavrodi died of a heart attack on Sunday shortly after complaining of weakness.
“Mavrodi was hospitalised in the 67th City Hospital. He could not be saved – he died this morning,” Moskovsky Komsomolets, a Moscow-based newspaper, reported.
Administrators of the scheme in Kenya say they have put the internet-based infrastructure on “pause mode”, which means that all those holding “mavros” – the pseudo-currency that Mr Mavrodi sold – can do nothing with it.
“In the near future, the administration will take a decision concerning MMM’s future and report on it officially,” a statement on MMM-Kenya website said.
That means that all those with money in the Ponzi scheme cannot withdraw it.
In January, Central Bank of Kenya Governor Patrick Njoroge warned those trading in cryptocurrencies, such as Bitcoin and Mavrodi’s Mavron, that the bubble could soon burst on them.
“Be ready to lose all your money in that whole operation,” Dr Njoroge said.
But even with the CBK warning, MMM-Kenya continued to operate, luring thousands into the scheme with the promise of 100 per cent return of the money put in.
In the countries where it operated, MMM has turned out to be the largest market of Bitcoins through their MMM variants and Mr Mavrodi was blamed for the Bitcoin rally that saw the value of cryptocurrency surge.
But, like other pyramid schemes, MMM-Kenya relied on more members joining in.
In Nigeria, the pyramid scheme collapsed after the number of those seeking help got higher than those advancing help.
In Kenya, recruiting agents, known as guiders, lured their victims into meetings enticing them to enrol – in order to be assisted later on by newcomers.
New members were told that they would be rewarded if they donated money to the needy – the older recruits – and after sending the money they would earn cryptocurrency points.
The more you gave, the more points you got. They were also promised of a 30 per cent monthly return on their investment and higher returns when they offered to assist members that ask for financial assistance.
“How much money do you need to be absolutely happy,” they would ask new recruits in an online game of wits.
Members were supposed to pick the amount of money they would give to others and the growth rate.
If say you put Sh3 million as the money you require, they would ask you the amount you can give as “help” to others – and from that amount they would calculate when you would be able to start receiving help.
The type of contribution you gave also determined the monthly growth rate, which is between 30-50 per cent.
Once you joined the MMM network, one was asked to make a “personal help” of not less than $10 (Sh1,000) before asking for help from those joining the chain.
Once you made the donation, you were promised to get 30 per cent of the amount you gave – meaning that your bitcoin wallet would be credited with points making you eligible to apply for Sh1,300 help.
Again, the more you recruit new members, the more bonuses you get by earning points known as Mavros, which you can withdraw as money – in a complex web of deceit.
“I lost Sh1.5m in bitcoins after I joined it on being convinced by testimonials in their website,” Boniface Korir said when the Nation first exposed this scheme in January.