Fraud Risk Assessment: MMM Global

MMM Global
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  • MMM Global
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  • Last modified: February 3, 2016
  • Legitimacy
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MMM Global (mmmglobal.org & mmmglobal.biz) was launched in 2011 as a Bitcoin pyramid scheme. Unlike most other scams that try to hide their true nature, MMM Global has chosen the remarkable strategy of promoting itself exactly the way it is while using lies and exaggeration to create its own accommodating reality. Its apparent success warrants a closer look at this financial black hole.

It should be stressed that pyramid schemes are typically classified as a type of fraud and that they are unsustainable by nature. Lost funds are unlikely to be recovered. One should never invest in any type of scam regardless of how it is presented. The company’s legitimacy has been evaluated based on the items listed below. Every individual item has been checked for the presence of obvious red flags or warning signals. If these are present, an explanation detailing what triggered them has been included. A detailed description of the reasons to evaluate each of the included items can be found below the table.

Persuasion
Total Flags: 15 (3 Warnings = 1 Flag)
Phantom Richesflag-iconMMM Global claims it is not an HYIP, while it does try to lure in users with returns of 20-100% per month.

This is where MMM Global starts building its own reality, as it calls itself a mutual aid fund or donation community. MMM Global argues a donation cannot be considered an investment, but with a possible return of at least 20% this is obviously a paradox. There cannot be a (possible) return on a donation, because that would make it an investment in legal terms. There isn't a monetary threshold where an investment becomes a donation.
Scarcitythumb-up-iconN/A
Source Credibilityflag-iconIn return for their "donation" users receive an amount of Mavros (MMM Global's internal currency), which can be cashed out by requesting a "donation" from other users at a later time (while the Mavros accumulate returns in the meanwhile). In short, users pay other users directly. MMM Global uses this to establish legitimacy as this means the owner cannot run off with the money. This ignores the fact that the owner can extract as much from the scheme as desired, as he can request an unlimited amount of money at any time.
Social Proofflag-iconThe scheme takes its affiliate program to the next level with simply requiring users to promote MMM Global in order to receive significantly more return on their investment (a combination of Reciprocity and Social Proof).
Reciprocityflag-iconMMM Global offers additional returns for those who "generate extra traffic to the MMM website". On top of that users also receive other bonuses such as a registration bonus.
Products
Guaranteed Returnflag-iconThe websites states that "strictly speaking, losing your donated funds is impossible". Technically this is correct, but as argued under "Phantom Riches" talking about "donations" is nonsensical. It continues to add that there are no guarantees, but then states that "it’s quite logical and predictable that anyone who regularly grants money in the future will get more than granted, because the number of participants in the community of MMM is constantly growing". The latter is a cunning attempt to comfort the users and making them feel that investing is safe. Additionally, MMM Global fails to explain its logic, as there is only a finite number of investors and the scheme thus cannot grow indefintely. The latter is why pyramid schemes are unsustainable by nature.
High Return / Low Riskflag-iconMMM Global does the math for you by explaining that "at 100% per month the contributed amount grows almost 4096 times per year".
Overly Consistent, Positive Returnsflag-iconThe only relevant factors for this scheme are user growth and the withdrawal rate. As long as these remain high and low respectively MMM Global can continue to pay consistent positive returns.
External Risk Insurancethumb-up-iconN/A
Secretive or Complex Trading Strategyflag-iconRather than trying to hide its nature, it simply acknowledges it functions as a pyramid scheme and justifies this by stating that this is how financial institutions work. According to MMM Global these financial institutions "do not create new products, but attract new customers and money to pay the 'old' customers". It is, however, highly likely that most people will find that they did not recently receive free money from their bank, and that they are still repaying their mortgage without the need to recruit new customers for their bank. MMM Global conveniently makes use of any distrust people may have in the financial industry, but the story is clearly nonsense. It also does not change the fact that pyramid schemes are typically classified as a type of fraud (and therefore illegal) and that they will inevitably collapse. Invested participants will subsequently lose their money.
Service
Website Availablethumb-up-iconYes
Website Registration Detailsthumb-up-iconBoth websites are registered in 2014, and while not expire until at least 2017.
Website Designexclamation_warningThe website looks as if it comes from the days of Sergey Mavrodi's first scam back in the 1990s.
Grammar on Websiteexclamation_warningThe text on the website is quite painful to read, as it is a lengthy collection of poorly written nonsense.
Payments Optionsexclamation_warningBitcoin only
Service Disruptions & Unbusinesslike Conductflag-iconThere isn't a legitimate business or community in the world that promotes itself as a pyramid scheme, because it is a fraudulent unsustainable system.
Contact Informationflag-iconMMM Global has no phone number and does not list its address.
Business
Verified Addressflag-iconHidden (WHOIS privacy protected), but the owner is a known scammer (see Verified owner).
Verified Ownerflag-iconThe owner, Sergey Mavrodi, is a known and convicted serial scammer who has even ran a pyramid scam with the same name before.
Business Registrationflag-iconMMM Global does not consider itself a business.
Financial Regulator Registrationflag-iconMMM Global does not consider itself a business.
Independent Auditsexclamation_warningNone

Note that items with a warning instead of a flag indicate that these could occur at a legitimate company. For example, legitimate companies will normally try to persuade you into buying their products. Multiple warnings will, however, still trigger a flag. A description for the listed items is provided below. This list is meant to assist with identifying obvious scams, and therefore does not provide any guarantees that a company is truly legitimate.

Phantom Riches
The most common tactic used by fraudsters is called “phantom riches”. By dangling the prospect of wealth such as “big payoffs”, the scam artist tries to get you to stop thinking logically.

Scarcity
Using the fear of missing out, fraudsters create a false sense of urgency with statements such as “last chance” or “only so few available”. This causes people to agree hastily, before even having the opportunity to think about what they’re doing.

Source Credibility
Persuasion is more likely when the source presents itself as being credible, expert and trustworthy. Common tactics used by scammers to make themselves look legitimate include using fake websites or hacked emails and pretending to be someone they are not. Alternatively, sources can also be external with claims such as “Warren Buffet has already invested in this”.

Social Proof
Fraudsters take advantage of herd behavior by creating the illusion of consensus or social proof that the investment is legitimate with claims that “everybody is already doing it”, or referral programs in which members encourage their friends and associates to invest as well. This automatically triggers something in the head that says: “if everybody [or someone from the inner circle] wants it, it must be good”.

Reciprocity
A business is likely to receive far more of our trust when it provides a lot of free value, because of the rule of reciprocity which causes us to tend to feel obligated to return favors after people do favors for us

Guaranteed Return
All investments carry some degree of risk, so a guaranteed profit is a clear red flag.

High Return / Low Risk
Like a guaranteed return, a high return / low risk investment opportunity also defies the common risk-return relationship. The best advice is an old one: “if it sounds too good to be true, it probably is”.

Overly Consistent, Positive Returns
Cryptocurrency markets are among the most volatile markets, hence the performance of any related product or service is also expected to fluctuate.

External Risk Insurance
The fraudster may present some external risk insurance for the investment in order to add to its credibility. In reality, insurance is only seldom acquired and guarantees typically lack substance. Dummy companies are often used to act as the guarantor or insurer.

Secretive or Complex Trading Strategy
Even in the world of cryptocurrencies one should be skeptical about special competitive advantages without any proper disclosure, or when the information is incomprehensible or incomplete. Too often only the positive elements are accentuated.

Website Available
Considering the importance of  domains and websites in the internet age, there is almost no reason for a legit company not to have one.

Website Registration Details
Very few scam websites survive longer than one year, so domains are generally registered for just one year unless otherwise required for the specific domain. For the same reason, websites created less than one year ago should be considered suspicious.

Website Design
Amateurish, cluttered and disorganized websites can point to a scam as many scam sites use text and images from legit websites and other sources which may not work together very well.

Grammar on Website
Many scammers have limited English proficiency.

Payments Options
Even though cryptocurrency payment options are logical for a cryptocurrency company, it is also very convenient for scammers as the recipient essentially remains anonymous. The same goes for services such as Western Union and Moneygram. Hence a lack of alternative payment options should still be considered a warning signal.

Service Disruptions &  Unbusinesslike Conduct
Especially Ponzi scheme promotors will encourage participants to “roll over” their investment. These schemes are not very fond of investors cashing out, which may lead to difficulties receiving payments and a non-responsive or difficult to reach customer service.

Contact Information
Legitimate companies have very little reason not to list their contact information.

Business Verification
First, you should never hand your hard-earned money over without knowing where it is going. Second, you should do a background check to avoid handing it to a known scammer. Be weary of people without an online identity. Scammers will typically try to hide their identity or conceal their true identity to avoid being easily discovered. Especially investment services are normally subject to strict regulatory oversight, so a registration should not be hard to find.

Independent Audits
Audits certainly do not root out every instance of fraud, but auditors do have a responsibility to detect errors or fraud in the company’s financial statements.

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