MMM, Ponzi Schemes And System Failure

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EFCC Breaks Words Of Admonishment To Nigerians As MMM Freezes 3 Million Accounts

MMM, Ponzi Schemes And System Failure, By BABA GRUMPY

I was incensed when I read a news article in December 2016. In the article, the founder of MMM Sergey (Sergei) Mavrodi said some rude words about the President of Nigeria.

This piece was written by Baba Grumpy. The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of

I desperately wanted him to physically visit Nigeria & as we say, ‘if dem born him well’, let him repeat those words so someone can shut his gob. It is ever so easy to throw insults from a long distance. I reckon a short sharp encounter with LASTMA will reset his poorly wired mental faculty. Forget all that strong man front.

After reading that article, I thought about writing this one on the systemic failure that allowed the MMM scheme take a strong hold on the Nigerian public.  My intention is not to focus on the specifics of Mavrodi’s comments as I have seen a robust line-by-line response by a Nigerian leaving in Russia.

Leave Us Alone – Why Every MMM Participant Has Already Lost (2)

Leave Us Alone – Why Every MMM Participant Has Already Lost (1)

I have also seen a few articles over the last few weeks comparing the Nigerian state to a ponzi scheme like MMM. I feel the articles comparing the Nigerian state to MMM are narrow minded and are potentially aimed at point scoring. If they are not, they will understand the following:

The entire global banking system is a Ponzi scheme. If every single depositor of ANY bank turned up today to withdraw his or her money, that bank will collapse. If you disagree or are tempted to argue about this, please be kind enough to read about fractional reserve banking first.

Retirement  / Pension systems everywhere is a Ponzi scheme. It is built on the belief that many will continue to pay in to allow retirees collect their pension. With longer life expectancy, low birth rate in many advanced countries, challenging global economic conditions, the rise / dominance of low wage jobs, those paying in today will be very lucky to get anything out in the future.

The ease with which politicians are able to call upon soldiers to defend the territorial integrity of any state is the world’s biggest ponzi scheme in my opinion. What do those soldiers get in return for cleaning up the mess created by the politicians? Some medal and some fancy parade if they are lucky to return from the battlefront without loss of life and limbs. What do their family get in return? Loved ones suffering from PTSD or some incurable trauma for the rest of their lives. Some return for today’s patriotism.

The MMM Promoters In Nigeria: The Blind Leading The Blind (2)

The MMM Promoters In Nigeria: The Blind Leading The Blind (1)

Also, the possibility of success, happiness, peace, security etc. held out to many by parents, teachers, religious leaders, politicians, mentors etc. is another huge ponzi scheme. If you realize that only 1% of the people in the world own as much as the remaining 99% you will realize that perhaps our teachers etc. have all sold us some utopian ponzi scheme about life in general.

To the narrow minded critics comparing Nigeria and its government to a ponzi scheme, be reminded that everything you accuse the government of, is backed by statute / law / regulations and there is often a legal recourse for most ‘government backed ponzi schemes’.  For example, there is deposit protection for your money in the bank if that bank fails. There is a pensions regulator that potentially ensures your old age money is safe in certain circumstances.

Leaving all of that aside, my biggest issue is the systems failure that ensures these Ponzi schemes continue to raise their heads and defraud ordinary people of their life savings. Nigerians have endured a lot. Forum Savings & Loan, Nospetco, Umana Umana and now MMM. What next? Full return of MMM in January? Buy a lottery ticket first please.

A common thread through all of the Ponzi schemes is a failure of the system. The financial system, the financial regulation system, financial crime compliance systems, and in the case of MMM, the failure of the Church and of society in particular.

My focus is mostly about the Nigerian financial services industry, its regulator & those entrusted with enforcing any regulatory penalties. If you discount the fact that today’s world is far more interconnected than the days when Forum, Umana Umana and Nospetco reigned, you then wonder why the Nigerian system allowed MMM take root in the country.

MMM: Nigerians Are Not Greedy, Merely Desperate

It is not as if nobody knew of MMM before they dropped anchor in Nigeria. It is not as if Mavrodi is an ex – convict and that his new world order otherwise known as MMM had not caused misery in other countries.  It is not as if nobody has heard of Bernard Madoff before. That respectable former Chairman of NASDAQ and a well respected member of America’s elite.

Mr. Madoff ‘s Ponzi scheme has been branded as the world’s largest.  He made the American investment community look like idiots and its regulators like The US Security & Exchange Commission look like naïve schoolboys.

I am aware that Madoff’s Ponzi scheme is in no way similar to MMM’s scam. Madoff’s scheme was well disguised. It was disguised as a regulated investment scheme, a scheme regulated by a government type body. However the regulator dropped the ball. The sophisticated investors who were charmed and offered ‘too good to be true’ returns dropped the ball as well.  On a slightly positive note, it appears only half of his victims eventually lost money but America and the world learnt something from the unraveling of the Madoff Ponzi scheme and have put in a lot of circuit breakers into the financial services industry to potentially avoid the recurrence of such a blatant ponzi scheme.  One of the largest banks was sued for enabling (effectively acting as the bank account) Madoff’s ponzi scheme and lost a lot of money as a result of the court case. Boiler room schemes (very similar to Ponzi schemes) abound but regulators in Western Europe and America go to great lengths to monitor these schemes and nip them in the bud. They are not uninterested and they don’t decide to act when it is too late.

Some of the overall changes implemented by banks and regulators worldwide include what I choose to call, a more hardnosed approach to know your customer. As we speak, unexplained large deposit sums into personal or business bank accounts are investigated. Verifiable evidence needs to be provided or the owners of the bank account are reported to the authorities and their account closed, sometimes without notice. These actions will not cure all financial crimes, as bad things will continue to happen as long as there are bad people.

Why Every Nigerian Must Know About MMM (1)

But what did we do in Nigeria with MMM? What are we doing? Will the financial services regulators in Nigeria be bold enough to take enforcement actions against the religious organizations that promoted the sale / spread of a financial product without authorization? Are there Civil Society Organizations or High Profile Human Right lawyers who can sue these religious organizations for their role in the MMM scheme?

What steps did our banks & other financial institutions take when they noticed that the deposits into the bank account of some of their customers did not follow a usual pattern? Did they have robust know your customer policies in place? Did they report these unusual transactions based on the applicable money laundering regulations and if they did, what did the regulators do with the reports? These questions can be asked of our financial institutions with respect to all financial crimes in Nigeria as it appears without the aid of the financial services infrastructure in Nigeria, theft of communal funds might reduce significantly.

When MMM froze its scheme in Nigeria, the EFCC which is at the apex of our financial crime fighting infrastructure in Nigeria suggested through its social media / twitter handle that investigating the MMM scheme wasn’t at the top of its priority.  I think it is wrong for them to think this way. To think that the MMM scheme was outside of their remit. Yes, there is a view that those that were scammed were deserving of their fate or were greedy. But the naivety or greed of the MMM participants does not change the fact that a group of people (The MMM promoters) perpetrated a financial crime, they contrived to market & sell a product or service or scheme of a financial nature without the approval of any of the regulator in the financial services industry and they succeeded in attracting a large number of Nigerians to their scheme.

Nobody took enforcement action and the scheme grew to the extent that 3 million Nigerians participated. In a country where less than 24 million BVN numbers have been issued, 3 million participants in a ponzi scheme should be considered systemically important. These high number / significant number of MMM participants that should have attracted the interest of all financial services regulators including the EFCC.  It is not enough to say participants were warned. Anything that threatens the smooth running of the financial services sector and integrity of investments & investment products should be of serious interest to the authorities and steps should have been taken to disrupt the MMM scheme at its infancy.

Before MMM, Nigerians Were Already Greedy And Vulnerable

The above is not in anyway absolving participants of their misguided action in investing in the MMM scheme. Perhaps we shouldn’t shed tears for the ones who went in with their eyes opened despite the alarm bell type caveats sounded by the MMM operators. I am however certain that some people only joined the scheme because Pastor Lagbaja of Kofosi Parish said it was a good scheme at Sunday service. I also believe there are many barely literate or vulnerable people who couldn’t understand or read the terms and conditions of the MMM scheme and decided to lunge in head first. They all lost but the greatest loser is the financial services industry in Nigeria as a few more people lose faith / trust in the system. The greatest tragedy in my opinion is that nobody (apparently) is interested in ensuring the MMM promoters meet with their nemesis in the hands of law enforcement agents.

Baba Grumpy works in Financial Services in the United Kingdom. He blogs mostly about football at His Twitter handle is @BabaGrumpy

This piece was written by Baba Grumpy. The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of



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