Experiments · Nobody Owns Money · Chapter 16
How a Ponzi scheme collapses: the MMM cash desk, month by month
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About this experiment
A pyramid pays its old members with the money of new ones. While more newcomers arrive than old members leave, the payouts go through and everyone is happy. When the stream of newcomers dries up, there is nothing left to pay with.
Sergei Mavrodi built such cash desks several times. The first MMM collapsed in the summer of 1994. MMM-2011 barely hid that it was a pyramid, and stopped payouts in 2012. In 2014 he launched MMM Global Republic of Bitcoin, where the fund was topped up in bitcoin and the promised return went up to a hundred percent a month.
MMM reached Nigeria at the end of 2015 and promised thirty percent a month. On 13 December 2016 it froze the accounts of about three million people. Their losses were put at eighteen billion naira.
The model below is a toy: everyone brings 100 dollars, after the chosen term takes it out with the interest and leaves. The sliders set the promised rate, how fast newcomers grow and how many people are ready to believe. The higher the rate, the sooner the month comes when the till cannot pay.
From the book
Nobody Owns Money · Chapter 16
I'm Not a Freeloader, I'm a Partner
On December 13, 2016, shortly after its first anniversary in Nigeria, MMM froze all participants’ accounts, blaming system overload and negative attention from the government and the press. The freeze affected about three million people. Their losses were estimated at 18 billion naira. A month later the fund briefly came back to life, promised payouts on new terms, and stopped again.
Sergei Mavrodi died in Moscow in March 2018, at sixty-two, of a heart attack. Nigerian newspapers wrote about his death in detail, and in the comments their readers remembered their frozen accounts.