MMM was established in 1989 by
Sergei Mavrodi, Faced with difficulties in funding its foreign trade, the company switched to the financial sector. It offered
American stocks to Russian investors, but met with little success. In December 1992, MMM-Invest was created as a voucher investment fund, a type of entity created to collect
privatization vouchers. The MMM Ponzi scheme was launched in February 1994, promising annual returns of up to %. The company started an aggressive
TV ad campaign, spending 330 million rubles in March 1994. Another notable marketing effort was a giveaway of free
Metro trips to all
Moscow citizens on a particular day. At its peak the company was taking in millions of US dollars each day from the sale of its shares to the public. Mavrodi reportedly owned enough cash to pack several rooms full with banknotes. Regular publication in the media of the rising MMM share price led President
Boris Yeltsin to issue a decree in June 1994 to protect investors from false advertising. On 22 July 1994, the
Ministry of Finance issued a statement listing MMM among a number of investment firms which had illegally issued unregistered securities. As Russia did not have any laws against Ponzi schemes, the government decided to seek tax evasion charges. In the aftermath, some investors reportedly threatened to
set themselves on fire. Several organisations of "investors" made efforts to recover their lost investments, but Sergei Mavrodi manipulated their indignation and directed it at the government. Mavrodi was arrested on tax evasion charges, unrelated to the MMM scheme, on 4 August 1994. A 'Union of Defense of the Rights of MMM Shareholders' emerged, attempting to collect the 1 million signatures required to hold a no-confidence referendum against Yeltsin's government. In October 1994 Mavrodi managed to win a by-election to replace
Andrey Aizderdzis in the
State Duma, and with it immunity from prosecution. Mavrodi claimed to be the victim of jealous bureaucrats, and that MMM shares would regain their value if he was elected. During the campaign he was supported by
Vladimir Zhirinovsky, who hoped that Mavrodi would provide him with future financial backing. After being elected he appeared in the State Duma only once, to vote against an attempt to strip him of parliamentary immunity. He decided to stage a protest against a decision, but this time only 200 people showed up. In October 1995, the Duma cancelled Mavrodi's right to immunity as a deputy. In 1996, he tried to run for Russia's presidency, but his bid was rejected after officials ruled that most of the signatures he submitted had been forged. MMM declared bankruptcy on September 22, 1997. The original investigation was closed in 1997 for lack of evidence. While it was believed that Sergei Mavrodi fled to Greece, he was ultimately arrested in Moscow, and investigators concluded that he probably never left the city. Though no longer current, MMM
Bilets share certificates, which bear a resemblance to banknotes and formerly issued in ‘denominations’ of varying amounts, have gained some interest as collector's items. The MMM scandal led to increased regulation of the Russian stock market, but the legacy of the fraud led many to become extremely suspicious of any
joint stock companies. == Fraud scheme in developing countries ==