Mon, Jun 11, 2012 - Page 6 News List

Top Russian fraudster pushes new scam


Back in the threadbare 1990s, Sergei Mavrodi founded the most notorious pyramid scheme Russia has known, MMM, persuading millions that they could earn fantastic returns by investing in worthless paper.

Now, helped by the Internet explosion, he is doing it again, and has scores of Russians buying into his new scheme despite the relative stability of the oil-powered economy.

So far authorities have been powerless to stop him.

Mavrodi, a reclusive former mathematician, ex-lawmaker and convicted fraudster with wild hair and geeky glasses, has flaunted the fact that his latest ventures are “pyramids,” or Ponzi schemes.

Cheekily, his ads warned “pyramids are dangerous for your financial health.”

Soon after the breakup of the Soviet Union, up to 15 million people invested in colored bills bearing Mavrodi’s face. Reportedly 50 people committed suicide after the scheme collapsed in 1994.

Mavrodi’s new scheme, launched early last year, is called MMM-2011 and is organized on the Internet.

“This is where the money lives,” said an electronic billboard in Moscow’s Sheremetyevo airport, while an ad sprayed on pavements read: “Get your 40 percent per month!”

On June 1 Mavrodi announced that due to a “panic” that he blamed on media, he was freezing payouts for two weeks. With typical chutzpah, he added he was starting a new scheme called MMM-2012.

Moscow police said on Thursday they had opened a criminal probe into MMM-2011, over attempted fraud by an organized group on an especially large scale, with a maximum sentence of 10 years, but Mavrodi was not named or charged. He is currently in hiding and did not respond to interview requests.

However, his lawyer argued that authorities did not have any evidence to start proceedings against the scam artist.

“I don’t think they will charge him. There is a lack of corpus delicti,” Roman Tabachkov said on Thursday.

He argued that Mavrodi simply headed an “association of citizens based on certain interests — financial interests.”

Several other regional authorities have also launched legal action against MMM-2011.

The Federal Anti-Monopoly Service (FAS) recognized MMM-2011 as a financial pyramid last year. Yet the scheme is tough to pin down on because it is not registered anywhere and participants make payments in virtual Internet money.

“You can’t ban participants from handing each other money. It’s a kind of financial flashmob,” Dilyara Ibragimova of the National Agency of Financial Investigations said during FAS discussions last year.

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