Word: mmm
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Then came the painful lesson: things too good to be true usually aren't. Last week investors learned the hard way about the old-fashioned Ponzi scheme. MMM suddenly collapsed. By week's end thousands of investors swarmed around its Moscow offices, trying to redeem their pieces of paper. Many of the shorn had come from the Moscow Commodity Exchange on the other side of town, where windows were broken before they were told to try their luck at the company headquarters instead. On Saturday that market evaporated when the company folded up shop, and shares that had dropped from...
...debacle had been building for much of the week, as crowds of concerned shareholders camped outside MMM's building, waiting, mostly in vain, for the company to redeem their certificates. Police and Interior Ministry troops stood guard to intimidate potential troublemakers. There weren't many. The few lucky enough to exchange their shares for cash stumbled out of the building, with cardboard boxes and plastic bags bulging with rubles, to shouts from the assembled crowd: "Is there any money left?" A few yelled imprecations on Prime Minister Viktor Chernomyrdin and central bank chairman Viktor Gerashenko, but many were simply philosophical...
...MMM is the handiwork of Sergei Mavrodi, who is in his late 30s. Overweight and partial to expensive Italian suits, Mavrodi called himself an entrepreneur -- the label covers a lot of ground in Moscow these days -- and recently appeared in a newspaper survey as the sixth richest man in the country. He launched the MMM fund in 1992 with 100,000 rubles, worth about $50 today. Like all pyramid-type schemes, his snowballing effort worked well for a time. Shares priced in February at 1,600 rubles (the equivalent then of $1) traded at 105,000 rubles two weeks...
...house of cards began to topple on July 22, when the government, belatedly trying to apply limits, announced that MMM would not be allowed to issue new shares. That triggered a selling stampede. At week's end, as he surveyed the wreckage around him, Mavrodi took the offensive and tried to blame excessive regulation for his troubles. "There is every indication that the authorities have little concern for the interests of shareholders," he wrote in a letter to a newspaper. "What is more important to them is to decapitate MMM." Even as the crowds milled in front of the MMM...
Most Russians were not buying Mavrodi's antigovernment argument: even such opponents of President Boris Yeltsin as Communist Party leader Gennadi Zugyanov and aspiring presidential candidate Alexander Rutskoi remained silent about the debacle and the government's role. The MMM fiasco has already prodded the government into more energetic regulation of the country's unfettered capital markets, but how effective it will be is anyone's guess. The Cabinet announced it would direct the Finance Ministry to move toward establishing regulatory procedures, but that responsibility is shared with the central bank and the State Property Committee. It is far from...