‘”We are always shown best examples of a successful entrepreneurs and look at their case studies and reasons for success. With this presentation on Mr Mavrodi I wanted to go outside the box and present you an entrepreneurial story that was successful but not really legal. From Mr Mavrodiy’s case we can see all different theory applications that we cover: market analyzes, competition analysis, business model and so on. We also see that in the beginning of his life as an entrepreneur he faced a lot of difficulties but found the way to the top. This case also shows us that things in business not always go smooth as it is presented in books. You will need to face different occasions and decide if you need to bribe, get away with something using your contacts or eliminate somebody by other means. Nothing personal, just business, as they say. What is most important, you need to work according to your personal code of ethics. Different backgrounds, different interests and different ways of doing business. ”
Profile:
Sergei Mavrodi was born in 1955 in Moscow, USSR. He was an Entrepreneur, Russian businessman and financier; the founder of the financial pyramid МММ. Everybody in Russia knows about him. Some people call him a financial genius, some people call him a criminal and there are thousands who committed suicide because of him. The founder of the financial pyramid MMM Sergei Mavrodi January 25 2011 launched his new project "MMM-2011," which in his words, can bring participants from 20 to 30% profit per month.
MMM company:
The company was established in 1989 and was called MMM. Initially, the company imported computers and office equipment. MMM created its successful Ponzi scheme in 1994. The company started attracting money from private investors, promising annual returns of up to one thousand percent. It is unclear whether a Ponzi scheme was Mavrodi's initial intention, inasmuch as such extravagant returns might have been possible during the Russian hyperinflation in such commerce as import-export.In February 1994, the company reported dividends of 1,000%, and started an aggressive TV ad campaign. Since the shares were not quoted on any stock exchange and the company itself determined the share price, it maintained a steady price growth of thousands of percent annually, leading the public to believe its shares were a safe and profitable investment.
At its peak the company was taking in more than 100 billion rubles (about 50 million USD) each day from the sale of its shares to the public. Thus, the cash flow turnover at the MMM central office in Moscow was so high that it could not be estimated. The management started to count money in rooms (1 room of money, 2 rooms of money, 3 rooms of money and etc.).
In August 1994 Sergei Mavrodi was arrested for tax evasion. However, he was soon elected to the Russian State Duma, with the support of the "deceived investors". He argued that the government, not MMM, was responsible for people losing their money, and promised to initiate a pay-back program. The amount ultimately paid back was minuscule compared to the amount owed.
It was believed that Sergei Mavrodi left Russia and moved to the United States. With the help of a distant relative he started Stock Generation Ltd., another pyramid scheme based around trading non-existent companies' stocks in a form of the "stock exchange game" on the company's site, stockgeneration.com. Despite a bold-letter warning on the main page that the site was not a real stock exchange, between 20,000 and 275,000 people, according to various estimates, fell for the promised 200% returns and lost their money. According to U.S. Securities and Exchange Commission, losses of victims were at least USD 5.5 million.
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.
Let's see what the new MMM-2011 will bring this time...
by Pavels Zascitnikovs BBA4
