“Community donation” scheme, MMM South Africa is heading to the high court to lay to rest any claims that it is a Ponzi scheme, it said on Friday.
The group, which is a local brand of a global scheme founded and run by convicted Russian fraudster, Sergey Mavrodi, was responding to recent media buzz about its operations, which have painted the group as a multiplication scheme.
“It has never been proven by the Consumer Commission and/or by the South African Courts that MMM Community is indeed a Ponzi/pyramid scheme as alleged,” it said.
“Because of this situation, a number of participants, representative of the larger MMM-RSA Community has decided to approach the Court for clarity in this matter.”
MMM is currently under investigation by the Hawks, with the National Consumer Commission listing it as a potential pyramid scheme.
The Consumer Protection Act describes any scheme that offers returns 20% above the repo rate (6.25%) as a “multiplication scheme” – otherwise known as a Ponzi scheme.
The NCC recently sent out a warning cautioning consumers not to allow themselves to be taken for a ride.
“If it sounds too good to be true, then it probably is too good to be true and don’t invest,” said commissioner Ebrahim Mohamed.
The commission has also warned consumers to be aware that taking part in pyramid or Ponzi schemes is a criminal offence.
“We’re not a Ponzi scheme”
In its statement against allegations, MMM said it is not an investment scheme, rather it is “a platform for exchange of donations between its members”.
“In MMM all the members are informed that they are donating spare money but not investing money,” the group said.
“That is why MMM cannot be labelled as a Ponzi scheme. A Ponzi scheme is a form of investment fraud that involves the promises of high return on investments.”
The group says that it does not promise or guarantee returns – despite the group advertising the fact users can earn up to 30% per month quite clearly on its site.
The group also denied reports that the global scheme had collapsed, saying it simply restructured a failed experiment scheme, and it would have no impact on other schemes attached.
“How can MMM collapse if there are neither investments, nor returns? People will always be ready to help others and they will want to receive assistance from others. The cause of freedom cannot collapse,” it said.