A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.
Triple M, also known as MMM, is an internet Ponzi scheme which took Zimbabwe by storm. The scheme allows depositors to earn 30% interest on whatever investment they make every month. When first visiting the website you will see a message written “Yes, it is possible to earn 100% per month here, but this is not a HYIP”
The Reserve Bank of Zimbabwe (RBZ) says anyone who decides to invest in the local division of the MMM Global scheme are doing it at their own risk as MMM Global Zimbabwe is neither a “registered or regulated” unit. MMM is basically an informal internet Ponzi/pyramid scheme which claims to allow depositors to earn 30 percent interest on whatever investment they make every month.
MMM Global Zimbabwe calls itself “a community of ordinary people, selflessly helping each other” on its colourful website. “The goal here is not the money. The goal is to destroy the world’s unjust financial system.”
For instance if one invests $100 in to MMM, it gives that same amount to someone directly in the network who requires $100.When the depositor wants to take out cash, they notify the system via email and it selects someone who has the same amount of money. The system then allocates the money to the one withdrawing the cash.
Earlier this month MMM Zimbabwe announced that all those who are applying for money will get it by September 15 2016 as it was overwhelmed with request.
The RBZ has said that MMM Zimbabwe is unregulated, ‘investors’ who lose out will not have legal remedy.
“It has come to the attention of the RBZ that MMM Global, whose founder was once convicted and jailed in Russia for defrauding thousands of investors in a Ponzi scheme, has established a local chapter calling itself MMM Global Zimbabwe. MMM Global Zimbabwe is not a registered or regulated entity in the country. It advertises its operations through a website and through recruiting agents operating in various centres of the country. It has no official offices or office bearers,” said the RBZ.
When a Ponzi scheme is not stopped by the authorities, it sooner or later falls apart for one of the following reasons
- The promoter vanishes, taking all the remaining investment money.
- Since the scheme requires a continual stream of investments to fund higher returns, once investment slows down, the scheme collapses as the promoter starts having problems paying the promised returns (the higher the returns, the greater the risk of the Ponzi scheme collapsing). Such liquidity crises often trigger panics, as more people start asking for their money, similar to a bank run.
- External market forces, such as a sharp decline in the economy (for example, the Madoff investment scandal during the market downturn of 2008), cause many investors to withdraw part or all of their funds.