In the early 1900’s a young and charismatic Italian immigrant named Charles Ponzi arrived in the US. He has big dreams, a little bit of money and a lot of cunningness. The man works odd jobs to get by but, one day he comes up with a bright idea. He thinks the idea can turn profits from the international mailing system. Another man would follow the similar path in and would even have his face on his own self declared MMM banknote too, read along for the full story.

This young man believed that the different costs of postage in different countries was exploitable and smart way to make money. He eventually formed his own company called the Securities Exchange Company and started promoting this scheme as an investment.

Charles Ponzi Notorious Conman | Source: Wikipedia

The Origin Of the Scheme

With his charismatic personality he would promise large returns to unsuspecting investors. However unknown to most investors he was using new investor money to pay old investors back. This scheme is now a Ponzi scheme and everyone knows it. If you’ve heard this word, you may also have heard the name Bernie Madoff who practiced this same exact scheme. He scammed investors out of billions. A tactic used by some of these scammers is issuing coupons that have to be bought and then used to cash out whatever the person initially invested. One very notable and creative method was the MMM banknotes. These are very similar to real banknotes but, they have an image of the originator on the front of them. Read along to learn more about the MMM scheme.

Sergei Mavrodi – Founder of MMM | Source: HistoryOfYesterday & Moscow Times

Birth of MMM

The MMM company was the brainchild of Sergei Mavrodi. At the moment is an unknown Russian man who was described as being very bright. He initially worked random jobs to make a living but, he would go on to commit the largest case of fraud in modern Russian history. The MMM company was started in 1989 and the name comes from the 3 founders last names Sergei Mavrodi, his brother Vyacheslav Mavrodi and his sister-in-law Olga Melnikova. All of their surnames start with the letter M so that is the origin, nothing really special, clever or mysterious. The origins of the initial MMM Cooperative were legal and transparent. The company originally starts by importing modern western technology into Russia but, runs into legal trouble when the government accuses it of tax evasion. Looking to stay afloat they decided to find new life in the financial sector.

Financial Demo Showing Gains | Source: AS

Evolution of MMM

They first started by offering American stocks to Russian investors but, people were not interested in that. After that method did not work, they started promoting themselves as an investment firm similar to a mutual fund. MMM offered shares of their company to investors in exchange for large and unheard-of returns and people ate it up. At that point Mavrodi had grown into a large public figure and had gained a significant following. With the initial investor money a tv commercial and marketing campaign takes off. This content stands out to people because of the realistic looking people, in realistic everyday situations getting rich. Some say this working-class image worked to Mavrodi’s advantage but, others say that people were fully aware that it was a scam but, they simply played along to try and make a quick buck before it came crashing down. What do you think?

TV Commercial Featuring Mavrodi | Source: YouTube

Introduction of The MMM Banknote

Eventually MMM started bringing in unimaginable amounts of cash and some claim that they had rooms filled to the ceiling with cash from investors. The price of their shares kept growing and growing but, there was no fundamental growth behind the numbers being publicized as its value. The share value was just a made-up number created by Mavrodi. When they ran out of shares to offer the general public, they started printing their own coupons which appeared similar to an official Russian Ruble banknote from the era.

MMM Banknote Vs Russian Ruble | Source: Banknote World EDU & Shop

Design of the MMM Banknote

The MMM banknote/bond design looks very professional, the banknotes have MMM logos strategically placed on the banknote to make them look like a real banknote, real nonrepeating serial numbers and they even featured a portrait of Mavrodi on the left-hand corner. Most of these banknotes do not bear a security thread, most of them have a watermark of various designs such as scattered lettering, a graphic pattern, and a star pattern. These coupons created a parallel economy with people using them to purchase goods. Denominations ranged from 1, 10, 20, 50, 100.

Russia 1 Bilet MMM Banknote | 1994 | Source: Banknote World

Everything Starts Crumbling

In 1994 Mavrodi’s empire started crumbling as people started losing their money. Public outcry soon overtook their momentum and popularity. People are now able to see that the MMM banknotes they were hoping to make money off of are useless papers with no real value. Russian law at the moment did not convict him on fraud since no such law existed due to a gray area. However instead they decide to penalize him on tax fraud. He is taken to jail but, his cunningness and ability to play the system eventually get him out of serving a prison sentence.

While imprisoned he was able to register and get elected as member of parliament (State Duma) and the position also came with immunity which in turn allowed him to get out of prison. His immunity would end a year later when he would be removed from the position. The case would be reopened and in 2003 he was finally sentenced to 4 years in prison as well as a small fine. Pretty light sentence don’t you think?

Prison Cell in The Russian Federation | Source: AS

Paying For His Crimes

Mavrodi declares bankruptcy is sent to prison and publicly branded a criminal however his notoriety never died out. After his release from prison, he revived and rebranded the MMM scheme in Nigeria. This new scheme took place in 2015. He promised unheard of returns and financial freedom. As before many people fell for the trap and lost millions.

Mavrodi eventually died in 2018 due to health reasons. Before his death he managed to publish his own book called temptation. In addition, in 2011 a movie written about his Ponzi scheme hits theaters. It stars Russian actor Aleksey Serebryakov and its also in the Russian language. One topic that comes up a lot in the movie is greed. Greed being what makes the world go round. Do you think this is a true statement? Its portrayed as based on real life events and it details the rise and fall of the MMM empire.

PyraMMMida 2011 Film Is Inspired by The Real Life Events | Source: IMBD

I remember when I first stumbled upon the MMM banknotes a few years ago they didn’t really catch my eye. The figure on the front of the note looks off to me. Usual characters on these banknotes look a little more distinguished. As time went by and I learned about the figure and the history about MMM. I saw their tv commercial’s that were broadcasted on Russian TV, and I realized how much can be learned from a single person.

Many honest hard-working people lost their savings over greed. The only thing left to show for it is a tiny piece of paper with the face of the guy who did it to you. What do you think about the MMM banknotes and their history? Do you think it applies to the entire financial system that we all partake in?


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