How did the Russian MMM company defraud the stock market?

In July 1994, a major incident involving MMM's use of the stock market to fraudulently raise funds broke out in Russia, involving hundreds of billions of rubles, and involving more than 10 million people.

This incident has shaken people's confidence in the stability of the Russian economic system to a certain extent.

After the collapse of the Soviet Union, Russia began an economic reform known as "shock therapy" in an attempt to transform the system from a planned economy to a midfield economy in a relatively short period of time.

In order to solve the problem of long-term lack of vitality of state-owned enterprises that occupy an absolute position in the national economy.

On July 1, 1992, President Yeltsin signed an order deciding to transform most state-owned enterprises in Russia into joint-stock companies, except for state-owned farms, which were prohibited from undergoing joint-stock transformation within 1992.

All state-owned enterprises should be transformed into open joint-stock companies before November 2, 1992. On August 21, 1992, President Yeltsin announced the issuance of privatization securities with a face value of 10,000 rubles to 148 million Russian citizens.

, and stipulates that there will be 6,000 companies in Russia that allow citizens to use privatized securities issued by the same company to purchase company stocks.

In this rapidly changing economic situation, the three Ma brothers, headed by Mavrodi, immediately catered to the trend of government reform. At the beginning of 1994, the three brothers' cooperative registered in advance with a capital of only 100,000 rubles.

It became the "MMM Investment Company" with Mavrodi as chairman and named after his three brothers. It claimed that its goal was to build it into an all-Russian investment fund specializing in the issuance of stocks.

From then on, MMM Company began to defraud the stock market.

(1) Use public opinion media to make fraudulent and false advertisements.

At that time, Russia was in a state of disorderly change, and all speech and publishing lacked strict supervision.

This just provides a broad space for MMM to use advertising to exaggerate itself.

In February 1994, MMM launched a massive advertising campaign.

Almost all radio, television, newspapers, and magazines in Russia have published MMM company's fundraising advertisements. Among them, five Russian TV stations have an MMM company advertisement every 30 minutes on average.

Mavrodi's name and the name of MMM appear more frequently in public opinion media than Russian President Yeltsin and other political figures.

For a time, MMM Company became a well-known company in Russia, and Mavrodi became a central figure in the minds of Russian people.

(2) Claiming high returns to lure investors into being deceived, MMM Company has opened a large number of branches in Moscow, St. Petersburg and other cities to sell stocks. It is responsible for selling stocks to the public. As long as you invest US$100 in MMhA Company, you can buy stocks within six months.

Get $500 back, plus a whopping 400% year-end return.

If investors want to withdraw their investment, they can exchange their MMM shares at any major transfer point of the company.

Under the strong public opinion offensive and the temptation of high returns, no one considered the falsehood of the high M report. People believed that they could make a fortune just by buying MMM company shares.

People rushed to buy MMM's shares, and many even used all their retirement funds in the hope of getting huge returns.

(3) Create a charming pyramid, causing stock prices to skyrocket and inducing investors to blindly follow the trend.

Starting from February 1, original stocks with a face value of 1,000 rubles and printed with Mavrodi's face flooded into the public, setting off a stock speculation frenzy that swept across Russia.

On February), the buying price of MMM stock per share was 1,400 rubles, and the closing price was 1,600 rubles.

By June, the price of MMM's stock had reached 37,500 rubles per share.

It increased 36.5 times from the face value.

Faced with a return on investment of 20 to 30 times, all Russian investors are excited.

In just half a year, Sichuan MMM Company, relying on its "pyramid" investment return plan, absorbed hundreds of billions of rubles in funds and developed into a well-known commercial and financial group company in Russia.

It has agencies in more than 60 cities across the country. Its trading turnover accounts for half of Russia's trading turnover, and its daily income from selling stocks is as high as 40 billion rubles.

However, this pyramid-style investment fraud implies increasingly huge risks.

Once investors' confidence is shaken, they may stop investing, sell stocks, or demand payment.

The pyramid will collapse, and those shareholders who participated in the investment late will lose their money and become victims of fraud. On July 22, 1994, the Russian government, which has always been ambiguous about MMM, suddenly publicly stated that the government had promised MMM 400%

are skeptical of the annual returns, and the government does not guarantee the safety of investments in MMM companies.

Subsequently, MMM suddenly announced that except for its Moscow headquarters, other branches would no longer buy back shares from investors.

At this point, investors realized that the temptation was nothing but a deception. People sold their stocks or participated in a run frenzy. Its stock price plummeted by 50% on July 27 alone, and the myth of MMM was completely shattered.