The Mavrodi Phenomenon
The 90s is a unique period in the Russian history. It can be called a complete turmoil, a time of sharp breaking of the old values and of the 'wild capitalism'. It is characterized by the flourishing of crime and fraud: entrepreneurial people saw massive opportunities for implementing capabilities and the implementation of various schemes for which there would be no punishment. One of the most well-known speculators of this era is considered to be Sergey Mavrodi.
It is still hard to believe how this ordinary-looking Moscow engineer, who traded pirate audio and video recordings under the counter, within a few years, built a huge empire, which accumulated a third of the budget of the whole country.
When Mavrodi was a student, he became interested in Sambo and soon became a candidate for master without losing a single battle – the future head of the MMM was the absolute champion of Moscow. However, he did not continue his career, considering that it would take too much time and effort that he needed to carry out his plan. We are talking about changing the world, a tool for the implementation of which was the MMM.
MMM is Mavrodi’s most famous creation; a financial scheme, later called a 'pyramid', first appeared in the Soviet Union. In 1989, the cooperative MMM was established; it was reorganized in 1994 into a joint stock company and went on to become one of the most powerful institutions of the Russian Federation. According to approximate estimates, the company's shareholders were 10 to 15 million people. The initial price of its shares for six months increased 127-fold.
MMM money - 'mavrodiki'
However, Mavrodi could not stay on top for a long time: in the summer of 1994, he was arrested for tax evasion. The entrepreneur does not waste time in the predetention center; he collected the necessary documents for balloting to the State Duma. In early October of the same year, the businessman’s pretrial restraint was changed and he was released – as early as the end of October, he became a deputy of the State Duma. The aim of this maneuver was clear immediately – parliamentary immunity helped to avoid further prosecution. And this is not some kind of speculation or personal opinion, it is what Mavrodi himself said. Mavrodi did not hide his attitude to the honorary post: he did not attend a single session, except the one where the question of depriving the merchant of the immunity was considered. However, then, he managed to get away with that, but not for long.
… and long fall
On October 6, 1995, Mavrodi’s powers were terminated due to the neglect of official duties and commercial activities. Then again, the police got interested in the work of his companies. This time, charges were more serious: fraud on an especially large scale. On December 17, 1997 the businessman was on the federal and then Interpol’s international wanted list.
Back in 1994, all the MMM centers were closed. During the elimination of the company’s main office, a famous story about the 17 KAMAZ trucks taking out the money of the building emerged; their fate remains unknown. According to the businessman, the confiscated funds never reached the Central Bank, and were divided between those responsible for the closure of the offices of MMM employees of law enforcement agencies.
Mavrodi was put on the international wanted list by Interpol
From justice, he 'ran' until 2003, when he was finally arrested. The situation with the 'escape' from the police, he described in detail later in the interviews: all the time (precisely, for 5 years) Mavrodi was sitting in the building adjacent to his house. All the while, there were rumors that he was hiding in Switzerland, Scandinavia or Greece.
But even on the 'run' the enterprising engineer did not sit with folded hands: he managed to build an international pyramid – a virtual stock exchange Stock Generation (SG). It was closed because of complaints by SEC (Securities and Exchange Commission). It is noteworthy that SEC has lost a court case against SG (all participants voluntarily brought money to a legal entity), but the pyramid has already collapsed. Almost 275 thousand people were found victims. According to Mavrodi, he has not received a penny from all this fraud; all funds were allegedly confiscated by the Commission on the US Securities.
According to Mavrodi’s himself, in the end, his own people turned him in. On January 31, 2003, he was arrested. The businessman was charged with violations of the law on three articles of the Criminal Code: Part 3 of Art. 159 (fraud in a large scale), Art. 327 (forgery, manufacture or sale of forged documents) and Art. 198 (taxes and (or) fees evasion). Mavrodi did not admit his guilt on any of the mentioned episodes. The period for familiarization with the case materials was January 31, 2006; and this was despite the fact that they it included 610 volumes of 200-250 pages each.
As a result, the court convicted the president of MMM to 4.5 years in prison, four of which he had already served in the predetention center called Sailor's Silence.
While in detention, Mavrodi started a videoblog Prison Diaries, in which he talked about life in prison and "eminent" members of the criminal world with whom he got to spend time inside. In particular, according to Mavrodi, he was in a cell with five thieves in law, and at some point his neighbors were the murderers of the Nefteyugansk mayor Petukhov (investigation considers that the former head of Yukos Mikhail Khodorkovsky is the organizer of the crime), the famous killers from the Orekhovo OCG Alexander Pustovalov (Sasha Soldat) and Alexey Sherstobitov (Lesha Soldat).
Alexey Sherstobitov (Lesha Soldat)
Getting out from prison in May 2007, Mavrodi once again started frenzied activity: he was a guest of the TV-show called Let them talk hosted by Andrey Malakhov; then the host asked him if he started advertising something like MMM again, would people trust him their money? The businessman replied without doubt they absolutely would. And he was right.
"МММ will live forever"
Exactly one year after his release, he published a book called Temptation, and in January 2011, the entrepreneur announced the creation of a new pyramid – MMM-2011. On the project's website, it said that the MMM-2011 is a pyramid scheme, and investing money there the shareholder risks losing his funds at any time. In an interview for the show Let them talk, he said: "You are not forced to anything; and you are warned in advance that you can lose everything that you have paid, and you can be refused to get your money back with no explanation. No promises, no guarantees. I say that you can get up to 20% or can get nothing at all."
Oddly enough, the citizens of Russia, as well as in 1994, immediately invested their money there. However, unlike the system in 1994, MMM-2011 worked completely illegally: it was not a registered legal entity, nor did have a bank account. All operations took place 'by hand', up to the immediate transfer of money during the participants’ personal meeting.
New pyramid lasted for a little more than a year. On June 16, 2012 Mavrodi announced that the system will terminate its activities due to lack of funds for the payment of interest to the new participants. As a result of the MMM-2011 activities, he was prosecuted in Russia, Moldova and Belarus. At that, the businessman immediately announces the opening of a new project – MMM-2012. MMM-2012 lasted for even less: on 17 April, 2013, the businessman announced the next restart of the project. But Mavrodi did not think about giving up: according to the new concept, MMM was supposed to exist from a restart to a restart. In 2015, he stated that MMM stops its work in Russia, Belarus and Kazakhstan. However, that did not stop the activities of the pyramid; the project MMM Global appeared, and it aimed to carry out its activities around the world. According to the official website, MMM Global operates in India, Indonesia, Malaysia, Hong Kong, Bangladesh, Philippines, Thailand, Brazil, Nigeria, Colombia, Ecuador, Kenya, East Africa, China, Peru, Mexico, South Africa, Turkey and Japan. In general, according to Mavrodi, 137 million people from 118 countries around the world were involved in another MMM project.
The most reliable investors of MMM Global were the Africans. The website of Nigerian MMM promised its investors up to 30% of income per month. In this way, the system was supposed to do away with poverty in the country. All investments were carried out through a system of electronic money Bitcoin in order to hide the scale of the financial flows from government agencies and banks. Participants invest Bitcoins in the system, and all receive their payments in "Mavro" –MMM money, analogue of previous banknotes of 1994, nicknamed 'mavrodiki'.
The first payments were made with no delays, but further, the standard scheme starts working: at certain point, Mavrodi and the head of the local branch announces that the government does not let the system develop, so there will not be further payments. The businessman in his blogs promises to punish the greedy commercial structures, but the resumption of MMM activities never happens, or it works under the a scheme.
Mavrodi repeatedly claimed that the main item of expense in the pyramid budget is advertising. But in Africa, the agitation system has reached a new level. Each participant of MMM Global was obliged to create a so-called 'chain letter' (Letter of Happiness, or just LOH). After obtaining the first income, each participant receives a video of Sergey Mavrodi, who, under the threat of expulsion from MMM, requires the investor to create a certain information product praising the system. Simple "the system works!" in the comments is not enough, one needs to specify his status, the date, the amount of this aid and the positive assessment. In addition, it was required to make a video of praise which will explain all the advantages of MMM. Many heads of departments are dissatisfied with these results, and hang out at the local websites appeals scolding the lazy and ungrateful depositors.
Meanwhile, the agitation system LOH moves from country to country, and MMM Global continues to gain popularity and collect untold money.
Mask of the epoch
Mavrodi is a truly unique personality. In the 90s, he had the power comparable to a minister. Here is a little episode, characterizing the degree of its influence. In 1993, Mavrodi congratulated all the Russian on the New Year’s Eve on TV. Having managed to gather under his control nearly a third of the national budget (no one could tell the exact amount, even Mavrodi himself), he did not spend a penny to 'negotiate' with the security forces and government officials. For 5 years, he was in the house, located on the same street as his own old apartment, in which the entrepreneur has lived all his life. All this time Mavrodi had the opportunity to buy a separate island, but the head of MMM, according to his own statements, never even had a passport. Then, he spent 4 years in the special block of the predetention center with those who had to live their lives in prison, waiting for a life sentence. But that did not scare him and after the release, Mavrodi continues to implement utopian ideas. According to him, the main purpose of MMM is the collapse of the global financial system and the release of people from the yoke of capitalism; the businessman earnestly compares himself with Caesar and Alexander the Great.
Despite, to put it mildly, the questionable intentions, it is difficult to suspect the businessman of lying. In all interviews, Mavrodi’s appears in old sweat pants and "granny" horn-rimmed glasses, in short, looks like a typical 'unmercenary'. The simplest explanation claiming that it is all 'for show', but in fact, back home, he bathes in dollars is not working as bailiffs constantly take his revenues on account of the victims of MMM.
At the same time, Mavrodi absolutely lacks any moral principles and any self-criticism. He frankly does not care about people who have lost all their savings (and some – their lives). "Do not talk to me in the language of morality and self-pity - I have no morals, no pity" - said Mavrodi in an interview. Until now, the convicted businessman did not admit his guilt: he believes that he has created an ideal mechanism for the scheme, which will last forever, if only it is not subjected to shocks from the authorities.
Now, it is obvious that Mavrodi will never return to the top, where he once was. And the businessman himself partially admits that: in his words, all of the world economy is a global financial pyramid, which does not tolerate competition. Despite that, watching the 'downed pilot' Mavrodi is extremely interesting: it is impossible to know what else his inventive though perverted mind will come up with.
The prosecutors want the former Russian Federation Council member to go to prison for 14 years instead of 9 and pay a 500-million-ruble ($8.8 million) fine instead of 70 million rubles ($1.2 million).