Lessons never learned: Return of a financial Pied Piper

Financiers in Russia are celebrating their professional holiday today. RT thought it appropriate to remember the man who taught millions of Russians one of the hardest financial lessons of their lives.

Financiers’ Day in Russia marks the day that the Ministry of Finance was founded 200 years ago. To mark the event, students around the country are being given lessons in money management.

When Sergei Mavrodi, who was recently released from prison, was last free, an estimated 10 million people were sucked into his pyramid scheme, masked as an investment firm. In its heyday he boasts it had amassed wealth equivalent to a third of the country’s budget.

Mavrodi is depicted as Russia’s precursor to Bernie Madoff, even today the former mathematician brags about its scale.

“Fifteen million depositors were behind me, that’s why the company was destroyed by the authorities,” he declares. “If it hadn’t been destroyed, it would have gone to its second phase and would have purchased companies like Gazprom.”

It took more than a decade to convict Mavrodi. He was eventually sentenced to over four years behind bars for fraud.

He spoke to RT in the Moscow apartment where in 2003 he was arrested following years on the run.

Nowadays he is making headlines again with a new venture. This time it is declaring its true nature.

“In short, it’s a financial pyramid and I am quite open about that,” he says. “This time round there is no nerve centre, the money is stored in the bank accounts of dozens of people. It is all spread like a net, so now you can’t close it, the system is invulnerable.”

Russia is one of the few countries where financial pyramids are not illegal. This leaves authorities scratching their heads as to how to react.

Several experts have said that existing means could be used against it, such as qualifying it as ‘preparation for crime’. However those same experts feel that this may be difficult and it would be best to legally define financial pyramids and ban their use.

However, Mavrodi’s scheme is hard to prosecute. It is based online rather than having an actual headquarters and is modeled on social networking. But most importantly it clearly warns potential depositors of the nature of the investment.

Recently a film was made about Mavrodi’s past exploits and it is that big screen persona that still entices some Russians – even with his criminal record.

There is a different side to the story too. All this fanfare is for a convicted fraudster, but there are still people who see it differently even today. They still perceive Mavrodi as an economic genius, and are willing to ignore his past in order to back his latest venture.

“I’m thankful to Mavrodi – he gave me a start in life,” says Svetlana, a supporter.

This continued support may be puzzling to outsiders but Mavrodi is an accomplished salesman. A self-styled Robin Hood he champions himself as a man of the people helping out everyday Russians who feel betrayed by the state and financial institutions.

However those willing to back Mavrodi are still in the minority. More numerous are people who see his tale as horror story with no happy ever after. Those who lost everything in the collapse in the 90s are still searching for answers.

Authorities warn the scheme will shortly implode, again destroying the savings and lives of everyday Russians. Mavrodi for his part is fearful it may cost him his freedom.

His main marketing slogan reads “Together we can do a lot!” – but many still fear all he can do is further harm.

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