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hroughout the 20th century, there have been countless attempts of financial fraud around the world. As time went by, these scammers became more and more ingenious with their schemes, but one of them takes the platinum medal for developing the most elaborate Ponzi scheme that the world has ever seen, leaving over 30 million people bankrupt in a matter of a few years.

Sergei Mavrodi was born in 1955 in Moscow. From a young age, he was very good at math and decided to pursue a career in finance. Sergei was quite an introvert who didn’t really like people and he always kept to himself. What Sergei really liked was money and he could not get enough of it.

In 1983, he was arrested for various financial frauds whilst working for a small company. The sum of money he had taken for himself was quite small so he was let off after 10 days in prison. Since then Sergei started to plan his grand Ponzi scheme.

MMM Organisation

MMM Акционерное общество (Russian Name) company logo (Source: Wikimedia Commons)

In 1989, Sergei and his brother Vyacheslav Mavrodi, as well as Olga Melnikova, founded the MMM company. The three letters are taken from each of the founder’s surnames. The company started by importing computers, quite good business in Russia at the time especially after the collapse of the Soviet Union.

Business went well, but as someone who loves financial frauds, the company was accused in 1992 of tax evasion leading to the collapse of their financial support. With no financial muscle to continue their trade, the company was forced to switch to the financial sector as Sergei was well acquainted with this industry.

The company did something that was new at the time which was offering American stocks to Russian investors, however, people weren’t that attracted. In December 1992, Sergei also founded MMM-Invest which was a voucher investment fund. Even with this, the company didn’t have much success.

Desperate to make money he launched a Ponzi scheme in February 1994 by promising investors they would get a return of 3000%. With the first sum of money funded from the scheme, the company went ahead with a very aggressive marketing campaign by creating TV adverts and endorsing celebrities that were adored by the Russian population.

Another very successful marketing campaign done in the same year was offering free metro tickets for the population of Moscow on certain holidays. The responses were amazing, with millions of people investing their money in this Ponzi scheme and even getting the word out to other countries around the world.

The Ponzi scheme he had created literally blew up, producing millions of dollars per day. In an interview from 2012, Sergei stated that one day he actually made 50 million dollars. He was making so much money that he was able to fill up rooms full of cash.

The downfall of Sergei Mavrodi

This scheme became so popular that similar companies around the world were being created and following the exact scheme, some of them even promising returns of 30000%. Many of these companies were however quickly closed and this was an illegal action, however not in Russia.

At the time Russia did not have any law prohibiting Ponzi schemes, therefore they were fully legal. The problem was that no such law had been stated as the government was still merging from communism to democracy which came with its own levels of corruption.

Some of the governmental bodies were very interested in the scheme itself so they made sure that nothing would happen to Sergei. The population was starting to retaliate as hundreds of thousands of people were not getting any return on their investments.

The pressure increased when numerous suicides took place as people became bankrupt by putting all of their savings into the Ponzi scheme. In total 50 people committed suicide because this scheme led them to bankruptcy, however, many people assume that this number is at least double as many cases were not recorded.

By that period of time, Sergei made over 400 billion dollars. Although what he was doing was “legal” at the time, false advertising wasn’t. As some private investigators started to look into the case Sergei knew that they would find out what was really going on so he decided to use his new political connections and gain immunity from prosecution by being elected the new State of Duma (the lower house of federal assembly of Russia).

There are rumors that the man who he replaced, Andrey Aizderdzis was actually assassinated in order to free the space for Sergei.

In 1997 he actually even tried to run for Presidency in Russia but he was caught trying to forge all of his votes, therefore he was kicked out of the political scene. Meanwhile, in the same year, the MMM declared bankruptcy and Sergei ran off with all the money.

In 1998, Sergei was placed on an international wanted list, and in 2003 he was found and arrested in Moscow. The case was very long but in 2007 he was convicted of fraud and given a sentence of four years.

Hit once again

You would think that he was done but once he got out of prison he reinstated MMM with the same scheme but in Nigeria. This time, however, he attracted his investors by telling them his vision of destroying the global financial system and promising only 30% returns on their investments (something more realistic).

The scheme began in 2015 and lasted until 2018 when Sergei passed away at the age of 62 due to health problems. In those three years, he managed to trick three million people of 10 billion dollars.

Even if this is the biggest Ponzi scheme in the world it is not very well known globally, being well-known in Russia. In 2008 he actually published a book entitled Temptation (written in Russian) where he explained exactly what he had done and the way he manipulated the system. A Russian film was also produced in 2011 based on Sergei Mavrodi’s life and scheme entitled The PyraMMMid.

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