South Africans warned against joining illegal pyramid scheme

The South African National Consumer Commission (NCC) on Monday warned citizens not to join the MMM pyramid scheme which is being operated by Russian ex-convict Sergey Mavrodi.

The NCC, a consumer rights watchdog, has concluded its investigations into the scheme and handed the findings to the police, spokesperson Trevor Hattingh told Xinhua.

The online scheme, known as MMM, claims to be a community of ordinary people selflessly helping each other. MMM promises 30 percent monthly returns for any money invested.

Mavrodi, founder of the scheme, was convicted by a Russian court for defrauding 10,000 investors out of millions of rubles in 2007, leaving many people bankrupt.

"The NCC has concluded its assessment on the business models and practices of MMM and other schemes whose activities were reported to it by the Financial Services Board and the SA Reserve Bank, and have handed the matter over to the South African Police Services for further assessment," said Hattingh.

The NCC, as a partner in the investigation into this matter, cannot at this stage divulge any details about its assessment, he said.

The scheme operates online and there is no office where one can lodge a complaint or ask for refund when the scheme closes.

The NCC stated that they do not know how people will recover their money when the scheme closes.

Hattingh said South Africans risk prosecution for taking part in the scheme.

"If it is found by the NCC and the police that MMM or any other scheme is indeed an outlawed pyramid, then participants in the scheme would have been participating in prohibited activities. In addition, they will not have any recourse if and when the scheme collapses, and they can be charged criminally for their roles in the scheme," Hattingh said.

The SA Consumer Protection Act defines a pyramid scheme as an arrangement, agreement, practice or a scheme where participants in the scheme receive compensation derived primarily from their respective recruitment of other persons. The act also states that a person must not directly or indirectly promote, or knowingly participate, join or enter a pyramid scheme.

Brigadier Hangwani Mulaudzi, spokesperson of the Hawks, a special anti-crime unit, told Xinhua that they have launched an investigation into the operations of the MMM.

"I can confirm that we have launched an inquiry into the operations and legality of MMM after receiving a report from the National Consumer Commission. We will only be able to comment further when we have concluded the inquiry," he said.

The scheme operates in many African countries like Zimbabwe and Lesotho. When one joins the scheme, he or she is asked to deposit the money at some banks in different people's accounts.

Source: XINHUA