Bank shuts down thou­sands of MMM ac­counts

Lesotho Times - - Business -

JO­HAN­NES­BURG — Capitec CEO Ger­rie Fourie says that the bank has shut down 2000 ac­counts as­so­ci­ated with “Ponzi scheme” MMM.

The CEO was speak­ing in an in­ter­view with Fin24 last Fri­day, and said that the bank had ear­lier in the year started freez­ing ac­counts as­so­ci­ated with the scheme, be­fore re­port­ing it to the South African Re­serve Bank.

Ac­cord­ing to Fourie, the scheme, which he calls a Ponzi Scheme, has had a big im­pact on the bank, and the “dras­tic” ac­tion was taken to pro­tect its bank­ing clients.

Over 2000 ac­counts linked to MMM have been shut down, Fourie said, adding that clients then be­come “ex­tremely vi­o­lent” — to the point that se­cu­rity had to be called into the branches.

MMM South Africa gained me­dia at­ten­tion af­ter Capitec Bank started freez­ing ac­counts as­so­ci­ated with the scheme in early 2016. Ac­counts were frozen amid ap­par­ent fraud con­cerns.

MMM, which was started by con­victed Rus­sian fraud­ster, Sergey Mavrodi, guar­an­tees a re­turn of 30% on any fees put into the sys­tem — which is 20% above the repo rate, and one of the key sig­ni­fiers of a mul­ti­pli­ca­tion scheme.

The Na­tional Con­sumer Com­mis­sion (NCC) iden­ti­fied a num­ber of other fac­tors in the scheme that in­di­cates it is a type of pyramid scheme — specif­i­cally, that is de­pen­dent on users re­cruit­ing other users, while each per­son is re­quired to pay to join, through what the plat­form calls “do­na­tions”.

The scheme is cur­rently un­der in­ves­ti­ga­tion by the Hawks, while its widely ac­cepted la­bel as a Ponzi scheme is be­ing chal­lenged by one of its mem­bers in the High Court.

The NCC as well as the South African Re­serve Bank have is­sued warn­ings around the scheme – and oth­ers like it — call­ing on the pub­lic to pro­ceed with cau­tion when deal­ing with their money.

In early May, the scheme col­lapsed af­ter pan­icked mem­bers with­drew funds en masse, forc­ing the scheme run­ners to freeze col­lec­tions and pay­ments, caus­ing those still stuck in the sys­tem to lose their money.

The scheme has since re­booted, with the prom­ise that all old ac­count bal­ances would be paid off us­ing new money com­ing into the sys­tem, ef­fec­tively adding the bur­den of debt to all mem­bers of the scheme.

Sup­port­ers of the scheme say that it op­er­ates like a stokvel, and is based on do­na­tions. Mem­bers have slammed the banks, and fi­nan­cial reg­u­la­tors for get­ting in­volved, say­ing that it is up to the in­di­vid­ual to de­cide what they do with their money. — busi­nesstech.

Newspapers in English

Newspapers from Lesotho

© PressReader. All rights reserved.