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Hot-Tip From Convicted Ponzi Master: "Join My Ponzi: It Is Better Than The Fed's"

Tyler Durden's picture


What's the difference between today's global finance system and a Ponzi scheme? This is the question that a 56-year-old veteran Russian financial scammer has been asking his victims. As Bloomberg points out, chillingly, he almost has a point. Sergei Mavrodi is one of the most infamous names in Russia's recent history. Back in February 1994, amid the turmoil of the country's transition to a market economy, the mathematician organized a Ponzi scheme called MMM. Now he's back with an even more audacious endeavor: the honest scam. Last year, he announced the new project, MMM-2011, by stating boldly that it would be another Ponzi scheme. "Even if you strictly follow all instructions, you can still lose," he wrote on a website describing the project. "Your 'winnings' may be withheld without any explanation or reason whatsoever." Depositors would be paid solely from funds invested by other depositors. There would be no attempt to generate income in any other way. This, he said, was perfectly all right, and no different than the way some of the largest institutions in global finance operated, from the Russian pension fund to the U.S. Federal Reserve. Perhaps most notably, Bloomberg reports his perspective on "What is money?" he wrote. "Nothing! Nihil. A phantom. … It is backed by nothing at all and printed by the masters in any quantity, at will."


Is Global Finance a Ponzi Scheme? Ask a Russian Expert


Sergei Mavrodi is one of the most infamous names in Russia's recent history. Back in February 1994, amid the turmoil of the country's transition to a market economy, the mathematician organized a Ponzi scheme called MMM. He offered returns of 100 percent a month and advertised aggressively on national television. Before the pyramid crashed in July 1994, it attracted as many as 10 million depositors


Mavrodi managed to avoid prison for nearly a decade, in part by getting elected as a parliamentary deputy and using the status to obtain immunity from prosecution.


"Nothing! Nihil. A phantom. … It is backed by nothing at all and printed by the masters in any quantity, at will."

Such a case might have been hard to make back in 1994, when Russians saw the U.S. dollar as an unassailable store of value. But in today's post-financial-crisis world, it's easy to see how Mavrodi's arguments could convince an uninitiated observer. The U.S. is paying back its bondholders with money freshly printed by the Fed. Greece is paying back investors with money the European Union has borrowed from other investors -- or maybe some of the same investors -- via its bailout funds. The developed world's central banks have printed the equivalent of trillions of dollars in new money to keep their financial systems and economies afloat.

Mavrodi's sales pitch worked. On May 31, MMM-2011 claimed 35 million participants throughout the world. The number may be wildly inflated, but there were certainly hundreds of thousands of people in Russia, Ukraine and other post-Soviet nations who invested with Mavrodi. Their money allowed him to buy outdoor advertisements (this time avoiding TV) and open up chains of “consulting offices.”


MMM-2011 halted payments on May 31. “Unfortunately, I have to admit that a panic has started within the System,” Mavrodi wrote, blaming the media for spreading malicious rumors. “This is a pyramid! If everyone rushes to withdraw the money, there is no way there will be enough money for everybody. In fact, it would be the same with any bank.”

Undaunted, Mavrodi launched a new pyramid, MMM-2012, saying that it would be used to prop up MMM-2011. “Don't worry, don't be nervous, we will fix everything, and you'll get paid in full,” Mavrodi wrote, adding immediately: “This is not a promise, just a feeling I have.”


Some MMM-2011 depositors, like their predecessors in 1994, have borrowed against their apartments to invest and are now facing homelessness.

It may all be their fault. They had been warned repeatedly by various officials and by Mavrodi himself. It is, however, an interesting moral issue, if not a legal one, whether governments have any obligation to protect financial innocents from themselves.

One also wonders whether the policy makers managing the world's financial system might be able to extract some lessons for themselves.

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Wed, 06/06/2012 - 12:28 | 2499754 LULZBank
LULZBank's picture

Ponzi Bitchezz!!!

I would trust him for atleast his honesty.

Wed, 06/06/2012 - 12:34 | 2499785 Pladizow
Pladizow's picture

"In effect, there is nothing inherently wrong with fiat money, provided we get perfect authority and God like intelligence for kings." - Aristotle 

Wed, 06/06/2012 - 12:44 | 2499821 Ahmeexnal
Ahmeexnal's picture

First it was the zombie attack in Miami.

Now comes the rabid attack of the spiders in India:


A town in India has suddenly been overrun by swarms of venomous spiders, leaving two people dead after being bitten.

It may sound like a B-grade horror movie, but residents of the town of Sadiya, in Assam state, say that on the evening of May 8 as they were celebrating a Hindu festival swarms of spiders suddenly appeared and attacked them, The Times of India reported.

Meanwhile, in Paris, Axl Rose suffers a "boating accident":



Guns N' Roses singer Axl Rose has been robbed of $200,000 of jewellery in Paris.

The Paradise City singer said thieves took three gold-and-diamond necklaces from an after party following the group's show at the Palais Omnisports de Paris-Bercy.

Wed, 06/06/2012 - 13:59 | 2500196 bonderøven-farm ass
bonderøven-farm ass's picture

Where's my SNORG-TEE hottie displaying the 'Meh' shirt?

M.E.H......Monetary Event Horizon

Miss my little darlin'........ 

Wed, 06/06/2012 - 12:45 | 2499827 B-rock
B-rock's picture

At this point, unwinding it would be so catastophic that we may as well jump on the bullshit bull run and buy SPY. We here all say that there will only be a worse, inevitable crash later, but total destruction is total destruction -- now or in a few years.  Being ZH educated and super-bearish just limits profits from these bullshit rips.  One koolaid, please. Ugh, I can't swallow.... 

Wed, 06/06/2012 - 13:08 | 2499925 Kayman
Kayman's picture

"Did the Koolaid quench your thirst ? Oh, dear me, I'd like you to meet our esteemed leader, Mr. Jones."

Money is based entirely on faith.  Faith is lost.  They can print to infinity. There is no income to support the debt.

Wed, 06/06/2012 - 14:54 | 2500456 lotsoffun
lotsoffun's picture

wrongo mr. kayman.  apparently they still believe,  and they will still believe, and they will still will want to believe and they still will continue to want to believe, and they still want to continue to want to still believing.  have you seen the avengers yet?

i missed dancing with what ever yesterday.  what a shame?  and i missed some playoff game.  of some sort.  i believe there will be another one soon?


Wed, 06/06/2012 - 14:02 | 2500213 Aquiloaster
Aquiloaster's picture

Not a real Aristotle quote, but I liked it anyway.

Wed, 06/06/2012 - 12:39 | 2499807 evolutionx
evolutionx's picture

german 2y rate + 600%




Wed, 06/06/2012 - 12:46 | 2499845 walküre
walküre's picture

Well, they were at 0% last week. Of course any improvement is massive from that level.

But the real story is ... there are no more takers at 0%?

Wed, 06/06/2012 - 12:54 | 2499866 Mercury
Mercury's picture

Tontine  bitchezzzzz!


You just know it's coming back.

Wed, 06/06/2012 - 12:58 | 2499896 Taffy Lewis
Taffy Lewis's picture

It reminds me of the old chain letters: break the chain and a sin will be cast on your mortal soul.

Wed, 06/06/2012 - 13:08 | 2499923 Mercury
Mercury's picture

Yeah, but it's more like:

Take out a fellow beneficiary and increase your payoff by x%

The perfect program for an insolvent government.  The obligatory, socially malignant incentives are perfectly transparent!

Wed, 06/06/2012 - 13:21 | 2499990 Big Corked Boots
Big Corked Boots's picture

Now THAT explains my life-situation.

+1 for the Philip K. Dick - Blade Runner - corrupt bar owner handle.

Wed, 06/06/2012 - 13:07 | 2499922 WallStreetClass...
WallStreetClassAction.com's picture

They should probably mention Mavrodi did 5-8 years in jail for his last pyramid. I have no idea how it's legal for him to do this again...

Wed, 06/06/2012 - 16:33 | 2500832 Peter Pan
Peter Pan's picture

The same way government keeps doing it to us.

Wed, 06/06/2012 - 18:54 | 2501328 margaris
margaris's picture

There is something in the peoples psyche that whenever a new pharao comes around and promises to build a shiny pyramid, the people are everytime persuaded that they have to sacrifice to help build ît.

To their own demise.

My point is: the sheeple will always desire a pyramid

Wed, 06/06/2012 - 15:02 | 2500488 Chuck Walla
Chuck Walla's picture

I think we have identified a leading contender for next Fed Chairman.

Wed, 06/06/2012 - 15:33 | 2500612 illyia
illyia's picture

Now that I've told you that I'm an ax murderer do you trust me?


Wed, 06/06/2012 - 12:28 | 2499761 Jim in MN
Jim in MN's picture

Brilliant!  Add that man to the Kill List at once.

Wed, 06/06/2012 - 12:42 | 2499825 ThirdWorldDude
ThirdWorldDude's picture

Au contraire, mon ami!

He's telling the sheep it's a ponzi and they're gonna be robbed, it's not his fault that they voluntarily part with their fiat.


Here's a good lesson, btw - http://www.youtube.com/watch?v=rf3TDCqXKJQ

Wed, 06/06/2012 - 12:50 | 2499858 EscapeKey
EscapeKey's picture

In the state's system, Irwin Schiff refused to pay his taxes. He wound up in jail.

If you have small children, you are completely in the system's grasp.

Wed, 06/06/2012 - 13:20 | 2499983 ThirdWorldDude
ThirdWorldDude's picture

Sure, in the system of legalized tyranny, you pay what you have to in order to survive.

However, being a parent gives you an additional responsibility to starve the system (no credit cards, no loans, no mortgages, no big bank accounts), preserve your wealth in physical assets and increase the odds of securing your children's future.

Wed, 06/06/2012 - 13:28 | 2500015 Patriot Eke
Patriot Eke's picture

The problem of course though is that those who do not play well within the system see their children secured by it.  Children have to be protected from terrorists after all!

Wed, 06/06/2012 - 12:28 | 2499763 sbenard
sbenard's picture

In a Ponzi, the participants do so willingly. We're being FORCED to participate! That's the difference as I see it!

Wed, 06/06/2012 - 12:35 | 2499787 CPL
CPL's picture

Good point

Wed, 06/06/2012 - 12:58 | 2499876 epwpixieq-1
epwpixieq-1's picture

Absolutely true. But, of course, we ALWAYS have a choice to participate at the minimum level. Just minimize as much as possible ( even to a point of restricting your self from the goodies/poison of the civilization ) all of your money transactions and invest/make/do things that can not be taxed ( there is NO LAW against that .... yet ). It is that simple. Ones most of the people do it the current system will crumble out of its own weight.

Wed, 06/06/2012 - 12:28 | 2499764 Marginal Call
Marginal Call's picture

I'll take 100. 

Wed, 06/06/2012 - 13:03 | 2499912 ITrustMyGut
ITrustMyGut's picture

BTFD! Bitchezz

Wed, 06/06/2012 - 12:28 | 2499765 Boilermaker
Boilermaker's picture

Convict him!?!?


Wed, 06/06/2012 - 12:29 | 2499768 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

This guy is the only guy that rivals G.O.A.T.F.U.C.T.

Wed, 06/06/2012 - 12:41 | 2499803 The Big Ching-aso
The Big Ching-aso's picture



With that kinda attitude he could go real far in government to the point of becoming even president or something.

Wed, 06/06/2012 - 13:12 | 2499938 bingo was his name
bingo was his name's picture

He has an offer from Goldman that he is considering

Wed, 06/06/2012 - 15:24 | 2500569 resurger
resurger's picture


now i know how MDB got an offer beside being Jewish.

Wed, 06/06/2012 - 13:53 | 2500165 Normalcy Bias
Normalcy Bias's picture

Exactly. I think we've just met our next Fed Chairman...

Wed, 06/06/2012 - 16:15 | 2500746 fourchan
fourchan's picture

seriously this guy has balls and may be my new hero.

Wed, 06/06/2012 - 12:30 | 2499771 Raymond Reason
Raymond Reason's picture

Penny auctions are wildly successful, as are state lotteries.  People would willingly invest with Madoff again, if they thought they could time it correctly. 

Wed, 06/06/2012 - 13:13 | 2499928 Kaiser Doomheiser
Kaiser Doomheiser's picture

Bernie Madoff (More or less to the tune of the Brady Bunch)


Bernie made off with the money

And spent it living like a king

He bought mansions, he bought Bentleys,

He bought tons of bling


Madoff paid off old investors

With money stolen from the new

'Till the SEC said "Bern, excuse me,

That's not what you're supposed to do."


That's when Madoff laid his maid off

And moved into surroundings more austere

The kind where Bubba, hubba hubba,

Pokes you in the rear


That's the story of Bernie Madoff

Who strayed off the path and turned to crime

Thus did Madoff finally fade off

And now he's doing time

Wed, 06/06/2012 - 12:30 | 2499772 bob_dabolina
bob_dabolina's picture

The Fed has the authority to print legal tender authorized by Congress under the 16th amendment.

So the difference is that Mavrodi couldn't print when people bail; the FED can.

Wed, 06/06/2012 - 12:31 | 2499773 midgetrannyporn
midgetrannyporn's picture

the bernank is a pig.

Wed, 06/06/2012 - 12:39 | 2499810 The Big Ching-aso
The Big Ching-aso's picture



I find your avatar disturbing becuz I find myself imagining things in it that I find disturbing.

Wed, 06/06/2012 - 12:53 | 2499864 midgetrannyporn
midgetrannyporn's picture

Someone asked what the avatar depicted yesterday so I will share with fellow ZHers so they don't get all hot and bothered. The guy in the hat is humping the leg of the hot chick (twice his size) at left who has been cropped out mostly.

Wed, 06/06/2012 - 12:54 | 2499880 Bolweevil
Bolweevil's picture

could you elaborate?

Wed, 06/06/2012 - 13:10 | 2499930 The Big Ching-aso
The Big Ching-aso's picture



I think we already know enough now.

Thu, 06/07/2012 - 00:06 | 2502187 WaterWings
WaterWings's picture

The Bernank is shorter in real life.

Wed, 06/06/2012 - 13:18 | 2499970 NotApplicable
NotApplicable's picture

Funny, I always thought it was that Lady Gaga thingamajig.

Wed, 06/06/2012 - 13:31 | 2500028 Patriot Eke
Patriot Eke's picture

Did it cost $3,000?

Wed, 06/06/2012 - 12:31 | 2499774 TheTwoJohns
TheTwoJohns's picture

Where I just put yesterday my mask of V-Vandetta?? Just let me think for a while


(cuz it may come in handy the other day..)

Wed, 06/06/2012 - 12:34 | 2499781 machineh
machineh's picture

'The mathematician organized a Ponzi scheme called MMM.'

Then the academics went and changed its name to MMT (Modern Monetary Theory).

It's still money for nuthin' ...

Wed, 06/06/2012 - 12:33 | 2499782 jimijon
jimijon's picture

I have always said that Charles Ponzi should be rewarded a posthumous Nobel for Economics and Finance. After all, it is what everyone has decided was the best!


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