Capitec Bank Freezes 2000 MMM Accounts

Jun 1, 2016

Capitec Bank has closed 2000 accounts connected to the MMM Ponzi scheme, said The CEO of the bank, Gerrie Fourie. Earlier this year, Capitec began shutting down accounts linked to MMM and reporting them to the South African Reserve Bank (Sarb).

The Ponzi scheme has adversely affected the bank, and so the bank took “drastic” measures to protect its banking customers, said Fourie. But clients whose accounts were frozen became “extremely violent”. The bank branches even had to call in security.

‘Capitec took drastic measures to protect its customers’

Ponzi scheme

Capitec Bank began freezing accounts related to the scheme early this year as they were concerned about fraud. Russian convict Sergey Mavrodi is the mastermind behind MMM, guaranteeing members a 30% return on investments. This is 20% higher than the repo rate, which means it’s a pyramid or Ponzi scheme, according to the Consumer Protection Act.

Several features of MMM indicate that it’s a Ponzi scheme – particularly, the fact that members are required to recruit other investors and have to pay to join via so-called ‘donations’, according to the National Consumer Commission (NCC).

MMM guarantees members a 30% return, which means it’s a Ponzi scheme’

Scheme Collapses

The Hawks are currently investigating the scheme, while one of the members is challenging the fact that it’s being labelled as a Ponzi scheme in the High Court.

Sarb and the NCC have warned the public to be cautious about investing their money in MMM.

Earlier in May, the scheme backfired after panic-stricken investors collectively withdrew their money, obliging the scheme operators to freeze ‘donations’ and pay outs. Consequently, members who were still trapped in the system lost their money.

‘Members who were trapped in the system lost their money’

MMM Reboots

Since then, the scheme has rebooted, promising to pay back all money lost with new ‘donations’ coming into the system. In this way, the burden of debt is essentially placed on new members of the scheme.

Supporters of MMM claim it functions as a stokvel and thus is a donation system. Members have strongly criticised the banks and financial regulators for meddling, arguing that individuals should be able to do what they please with their money.

Capitec says it is up to the members to demonstrate that their banking practices are not fraudulent and it will accordingly unfreeze their accounts.

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