Business

MMM fights Ponzi label

2016-05-01 15:00

Banks freeze accounts, so members file court application in bid to get it to rule that the money-making outfit is legitimate

Some members of the controversial internet-based MMM South Africa (MMM-RSA) have had their bank accounts frozen by various banks on suspicion that they are participating in a Ponzi scheme.

They have applied to the high court for it to declare that the scheme does not contravene consumer law.

Deon Janse van Rensburg, a member of MMM-RSA, has filed an application in the North Gauteng High Court against the commissioner of the National Consumer Commission (NCC), the commissioner of the SA Police Service (SAPS) and the National Prosecuting Authority (NPA).

He wants the court to declare that the MMM format is legitimate and does not have the characteristics of a Ponzi, pyramid, multiplication or chain-letter scheme.

According to the application, participants in the scheme took a decision on March 18 to take the matter to court after some of their members’ accounts were frozen due to “unsubstantiated” statements about the scheme made by the National Consumer Commission.

In court papers, Janse van Rensburg said that “participants are having their bank accounts frozen on the basis that proceeds from a Ponzi scheme are receipted into these bank accounts”.

“These participants were left unable to meet their basic financial obligations as a result of their bank accounts having been frozen without any conclusive evidence that the money so received contravenes any act or regulations, but on the mere whiff of a media rumour.”

The scheme, which has dubbed itself a “donations” and financial-assistance community, wants the court to grant them access to the NCC’s investigative report after an alleged probe between September 2015 and January. It claims the NCC conducted a radio interview where it said it had investigated MMM-RSA and asked the SAPS to investigate further, with a view to prosecution. In the application, Janse van Rensburg attributed the freezing of members’ bank accounts to “reckless” comments by the NCC about MMM-RSA.

The scheme, which promises growth of 30% a month on deposits by new participants, is the brainchild of Sergei Mavrodi, a Russian who was arrested for fraud and tax evasion after the Russian equivalent of MMM collapsed in 1994.

In an interview with the Financial Times, Mavrodi confirmed that he was charged with fraud and imprisoned for four and a half years. However, Janse van Rensburg and local MMM participants are convinced the scheme does not contravene the Consumer Protection Act. They want the court to force the NCC to provide reasons for the investigation and the investigation request to the SAPS.

They want the court to compel the SAPS to provide “full findings of the investigation it instituted at the behest of the NCC, including the basis on which those findings were arrived at”.

The court papers have, for the first time, revealed how the complicated scheme claims to work.

They claim that MMM-RSA “consists of a community of participants voluntarily involved in a mutual donation exchange known as MMM-RSA, which functions by way of a computerised platform accessible through the internet on computers and other electronic devices with internet capability”.

Janse van Rensburg said that, despite several attempts, they were unable to verify the SAPS investigation and the contents of the NCC’s findings.

Unlike the illegal schemes adjudicated under the Consumer Protection Act, their system warns members “not to offer assistance from money that they may require to sustain themselves, but to do so only from surplus funds which they may have available”.

Janse van Rensburg said that, unlike pyramid schemes or multiplication schemes, their system offered “no guarantees whatsoever that requests for assistance will be met”.

“It is equally possible that situations may occur where the requests for assistance exceed the offers to provide assistance while, on the other hand, situations may occur where offers to provide assistance exceed the requests for assistance.”

NCC spokesperson Trevor Hattingh said they were not served with the application. He confirmed that the commission had asked the SAPS to investigate the scheme.

“Arising from the outcomes of our assessment of the MMM scheme, the NCC decided to approach the SAPS to conduct a criminal investigation into it,” said Hattingh.

However, the NCC would not provide details of its own investigation into MMM-RSA, “because it will most likely compromise the investigation of the SAPS”.

NPA spokesperson Luvuyo Mfaku confirmed they had received civil litigation papers from MMM-RSA members.

He said they would study the application before issuing a response.

The SAPS was unavailable for comment.

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