Fraudster from Russia targeting South Africans?

While MMM South Africa purports to be a financial aid and donation exchange platform designed to ‘help the community’, questions are being asked by the National Consumer Commission (NCC) about the legitimacy of the website and the intentions of its creator Sergey Mavrodi, an ex-Russian Member of Parliament.
 
The website advertises itself as a “community of ordinary people, selflessly helping each other, a kind of global fund of mutual aid.” However, it has been referred to the NCC for investigation. (Scroll down for more information).
 
Concerns were raised mainly because Mavrodi has a chequered past. According to reports, he spent four and a half years in a Russian prison for defrauding 10 000 investors out of 110 million rubles (about R22, 495,936) in 2007, while running MMM in Russia.
 
In 2011 Mavrodi established MMM-2011, which is the foundation of MMM South Africa. As the MMM South Africa website explained: “The goal here is not the money. The goal is to destroy the world's unjust financial system.”
 
What is MMM South Africa?
 
The website is littered with grammatical errors and not all the information contained within it sets out exactly what MMM is about. It’s not clear, for instance, how the company makes money from this exchange platform. It would, after all, have to pay its staff and consultants who appear to be at hand online to answer questions from the public but when Justmoney queried how the organisation makes its money the responses didn’t directly answer our questions.
 
What the website does say is that MMM South Africa is a money lending or money exchange website. You pledge an amount that you are willing to give to someone, for free. In other words, you do not expect any form of repayment from the person who you lend the money to.
 
“MMM gives you a technical basic program, which helps millions of participants worldwide to find those who need help, and those who are ready to provide help for free,” explained the website.
 
An investigation?
 
Trevor Hattingh, spokesman for the NCC told Justmoney that the matter has been referred to the commission’s enforcement and investigation division. He pointed out that before the investigation can proceed, the Financial Services Board (FSB) needs to be contacted to clarify the referral of MMM South Africa to the NCC.
 
In an article that appeared in the Cape Argus, it stated that the FSB was aware of MMM South Africa, but had referred it to the NCC, as the FSB does not have the mandate to investigate pyramid schemes and Ponzi schemes.
 
However, Hattingh informed Justmoney that the enforcement and investigation division did not have any record of the matter being referred to it by the FSB. According to Hattingh, it was first brought to the NCC’s attention by the Cape Argus when it was looking for comment on Friday, and then again when the NCC commissioner Ebrahim Mohamed received an SMS promoting MMM South Africa and inviting him to join.
 
It was only after these two incidents that the matter was sent to the enforcement and investigation division, where it is currently being looked into.
 
Before a formal investigation can be launched, Hattingh pointed out that it must first be determined who MMM South Africa are, what they do and how they operate, before more can be done.
 
“In the meantime consumers are strongly advised to not participate in what could very well be an outlawed pyramid scheme where their monies could in all probability be lost,” stressed Hattingh.
 
At the time of publication, the FSB had not reverted with information regarding the referral to the NCC to Hattingh.
 
“The FSB’s media and stakeholder manager is yet to revert with information on the referral. Following my conversation with him earlier, it is envisaged that he will revert today still. At this stage the NCC still have not received the file from them,” said Hattingh in an email to Justmoney.
 
Is this a pyramid scheme or Ponzi scheme?
 
The FSB describes the two terms in the following way: “Participants in a Ponzi scheme believe that they are earning their ‘return’ from an underlying investment (a unique product, an investment in a ground-breaking technology, or a trading opportunity), while participants in a Pyramid scheme are aware that they have to recruit new participants to make money.”
 
Participants on MMM South Africa receive a ‘present’ of between $20 and $100 (R278 and R1, 389) when registering on the MMM South Africa system, according to the website, but this is only for people who have contributed their own money already.
 
In addition to the registration ‘present’ that you receive, you also earn 30% on your pledge amount. This interest is added to your pledge amount and indicates how much you are eligible for receiving.
 
This offering of 30% interest per month (which is a very high return on your investment) is suggestive of a Ponzi scheme.
 
Furthermore, the website offers referral bonuses to people who get others to join the site. The website does add that members of MMM South Africa are not required to invite new members to join, thereby avoiding the section of the Consumer Protection Act which states that “a person must not directly or indirectly promote, or knowingly join, enter or participate in” a pyramid scheme or multiplication scheme).
 
However, despite this disclaimer on the website, and MMM South Africa reportedly denying that it is a pyramid scheme, this referral bonus is suggestive of a pyramid scheme, with members being promised 10% of all deposits by the participants that they invite to join MMM South Africa.
 
How do you get your 30%?
 
The website claims that “yes, it is possible to earn 30% per month here, but this is not a HYIP” (high-yield investment programme). To get your 30% you first have to give money to someone else who is in need of it. There is no guarantee of you earning interest on the amount that you give away.
 
The website explained: “You declare the willingness to give help, after which your account will be credited with mavro (internal currency of the System). Mavro's amount will start growing from the moment of deposit at the rate of 30% per month. This sum in mavro shows how much you can request yourself.”
 
However, you can only request and receive money after confirmation. In other words, you have to give money to someone else before you can receive money. This is reportedly to show your willingness to help others.
 
You do not simply meet people and offer them money. You log a request on the website, and someone from MMM South Africa will facilitate the order and connect a lender and a borrower for the money transfer to take place.
 
The website highlighted that the money goes directly between participants’ bank accounts, and not through a central MMM South Africa account. Consultants from MMM do encourage members to use Bitcoins, which is a legitimate cryptocurrency, saying that the transaction will then be ‘faster’. However, using cryptocurrencies such as Bitcoins come with their own set of problems as the money cannot be traced. Moreover, if you lose a Bitcoin there’s nothing that can be done to recover it. For more information on Bitcoins, click here.
 
At the time of writing, the MMM South Africa Facebook page had 23 224 likes (however, this number appears to be increasing).
 
Be on the lookout – more typical South African scams
 
There are a number of scams that are focused on the South African public. Here are a few scams that you should be aware of:
 
Microsoft phone scam:For this scam, fraudsters cold call people claiming to be from Microsoft, stating that they need access to your computer or con you into downloading software. Microsoft have highlighted that they nor their partners will ever make unsolicited phone calls to fix software or security problems. For more information of this type of scam, click here.
 
The broken credit card machine scam:For this scam, a person working at a store or restaurant tells a client that the card machine isn’t working and that they need to fetch another one. According to a report, the scammer will then fetch another machine which is programmed to copy your bank card information.
 
ATM scams:Another scam to be aware of is card skimming/cloning at the ATM. Fraudsters slot a card skimming device into the card slot on the ATM, which copies your bank card with you withdraw money. According to a report, this is often used in conjunction with a small camera which records your PIN. Furthermore, when using the buttons on the ATM keypad, you leave behind a thermal signature, which can be picked up using a FLIR ONE thermal imaging attachment on a smartphone to see what your ATM PIN is.
 
Handheld skimming devices:This is probably one of the better known card scamming devices. It is a small device which can scan your card’s details. The only information the scammers don’t have is your PIN.
 
Phishing emails:Another common scam are phishing emails that appear to come from a bank. The emails can ask for banking information, or have links that say ‘click here’ for a variety of services, such as reactivating internet banking, redeeming rewards or accessing a payment. However, it is important to note that banks will never ask you to verify your personal information in an email.
 
In addition to these banking and money related scams, there are a range of other scams including cell phone and car scams which can swindle people out of their hard earned money. For example, there is the one ring scam, where scammers set up a computer to dial thousands of numbers and ring once. People who are curious about the phone call, dial the number back at what can be an exorbitant fee. For more information on phone scams, click here.