MMM BSC Multi-Level Marketing Scheme

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MMM BSC Promotion

MMM BSC was a blockchain-based multi-level marketing scheme launched in June 2019 which promised investors substantial returns and operated primarily using the Paxos stablecoin. At it's peak, it was responsible for more than 80% of all Paxos transaction volume. The scheme started to become more widely exposed in June 2020, and collapsed around the end of July 2020.

This is a global/international case not involving a specific country.

About MMM BSC

"JOIN MMM BLOCKCHAIN ​​SMART CONTRACT- -A new innovation in the MMM system that integrates [MMM] into the Blockchain smart contract technology that runs for 9 months, now launched on June 1, 2019."

"[I]magine a country that had no functioning economic system and a massive black market. As the Berlin Wall collapsed, so did the economic hallucination that was the centrally planned economy. The Chicago School of Economics group advised then-President Mikhail Gorbachev on a "shock therapy" approach to transition, leading to an unprecedented distribution of state assets (e.g., factories, buildings, natural resources) to people who could not tell the difference between a stock certificate and a stamp. Let's just say China did better with the gradual approach."

"Into this context came the ads. They feature a Russian man, Lenya Golubkov, who "invests" his money with a "securities cooperative" called MMM. His fortunes soon improve. He is able to buy boots, then a coat for his wife, eventually touring America with his brother and starting a successful business. The securities he buys look like stock certificates, promising returns of 100% per month and more."

"You must understand that everything on TV carried authority in those times. Like movies from the U.S. that hinted at Western opulence and the promise of new wealth associated with liberalization, MMM was sold as a dream to regular people in a language they understood. I imagine in many poorer, less-educated parts of the world, such storytelling still works. As does this image of a voucher for a share in a pyramid scheme."

"The man behind the scheme, Sergei Mavrodi, is a cartoon villain, dead at the age of 62 from a heart attack (who knows what that means in Russia now). He spent his life openly gaslighting regulators and politicians, briefly even becoming one to get immunity from prosecution. The people he was defrauding voted him in, but he ended up jailed anyway. Seemingly a brilliant mathematician and deeply cynical, Mavrodi wrapped the popular sentiments on the ground into a misleading trap for the unwary consumer."

"МММ was a Russian company that perpetrated one of the world's largest Ponzi schemes of all time, in the 1990s. By different estimates from 5 to 10 million people lost their savings. According to contemporary Western press reports, most investors were aware of the fraudulent nature of the scheme, but still hoped to profit from it by withdrawing money before it collapsed."

"In 2011, MMM re-opened as "MMM Global"." "It feels like a long time since the 1990s. But in terms of human nature it has been barely a blink. After Mavrodi got out of jail, MMM resurfaced in 2011, made its way to the internet and has now implanted itself into the body of cryptocurrency. Mavrodi is dead, but his scheme is the decentralized autonomous organization that nobody wanted, living on in the code forever. Like a tapeworm, it eats 10% of Ethereum's transactions and is responsible for 50% of the transfers for stablecoin Paxos, according to Coin Metrics."

"Interestingly, the third-highest gas-guzzler on Ethereum is another multi-level marketing scheme known as MMM Global, which has accrued over $5 million in ill-gotten Paxos (PAX) stablecoins."

"Let me introduce you to MMM, a pyramid scheme with roots in the former Soviet Union, which stole from nearly 10 million people during the 1990s. While decentralized finance and digital asset companies bend over backwards to be customer-centric and reform financial services (each in their own way), MMM is a pretender. It is a pretender that has stolen the language of the crypto economy to create a cancer in its body. It hides in the Paxos project and uses Ethereum for its 21st century machinations."

"But on-chain data shows that the two most active accounts on Paxos are linked to MMM BSC, a ponzi scheme which underwent exponential growth in activity this past year."

"MMM was the largest ever Ponzi scheme in Russia in ‘92-94, 10 million participants, 50 commited suicide after collapse of the scheme. The founder went to jail and then started a few more MMM projects globally, crypto-based. Amazing"

"PAX transfers involving the alleged crypto ponzi MMM BSC, an offshoot of the MMM Global scheme launched by Sergei Mavrodi in 2011, peaked at almost 16,000 transactions in late May. This problem isn’t a PAX-specific one, however, as 80% of USDT issued on the Tron blockchain (which is just a sliver of outstanding Tether volume) is tied to ponzi scheme payouts, according to the report."

"As for who or what is buying the PAX for the ponzi, Coin Metrics did not elaborate. But putting PAX in context with other stablecoins, the report notes that roughly 50% of PAX holders own some 80% of its outstanding supply."

Despite the presence of gas-guzzling Ponzi schemes on Ethereum, Castonguay, who works in blockchain gaming, doesn’t expect such scams to disappear any time soon. He said it was unfortunate that Ethereum was used in this way, but added:

“It's inevitable due to the unstoppable and permissionless nature of the technology. I suspect that even with strong regulation, Ponzi schemes on Ethereum will still be common, especially as privacy tools available on Ethereum get better,” he said.

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - MMM BSC Multi-Level Marketing Scheme

Date	Event	Description
June, 2019	Scheme Lanuch	The reported launch of the scheme, according to their Facebook page.
June 9th, 2020 9:00:00 AM MDT	CoinMetrics Analysis	CoinMetrics publishes an analysis of the MMM BSC scheme and the large portion of transaction volume it occupies.
June 9th, 2020 8:36:08 PM MDT	Decrypt Article	Decrypt reports on the multi-level marketing scheme.
July 25th, 2020 10:15:34 AM MDT	Collapse Reported	A YouTube video reports that the scheme has finally collapsed.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $5,000,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

The total amount recovered is unknown.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.