The man who cheated millions of Russians out of their savings

How best to describe Russia's most famous charlatan, Sergei Mavrodi? asks Time. "Take the swindling power of Bernie Madoff" and combine it with "the hypnotic creepiness of a midnight televangeist", and you'd be getting close.

During the 1990s, Mavrodi's crude Ponzi scam, MMM, cheated millions of Russians out of their savings becoming a byword for that decade's "shameless brand of capitalism". Estimates of losses range from $110m to several billion. Yet now he's done it again. Early last year he launched a new scheme, MMM-2011, which has just collapsed causing similarly widespread hardship. So why is he still viewed by many Russians as a folk hero?

In other countries, says Reuters, Mavrodi would be a pariah and such scams would be banned. "Not in Russia." True, he was eventually banged up for four years for the original MMM scam, but since Russia doesn't specifically ban pyramid schemes (see below), there's nothing to stop him from starting them up indefinitely.

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In fact, Mavrodi has already launched yet another pyramid scheme, MMM-2012, luring investors with the promise of returns of 30%-75% a month. He's touting it to those who lost their savings in MMM-2011 as the fastest way to recoup their losses.

Mavrodi, a trained mathematician, disguised his original Ponzi scam as an investment scheme. These days, he doesn't bother. "People voluntarily enter the system, they are warned of the risks. They are conscious of everything. How can there be fraud?"

Mavrodi even claims the high moral ground as "an anti-establishment visionary" in a corrupt world blazing the way to "a post-capitalist future". "Do you want some greedy banker to buy a third... limousine", he writes on his website, which is packed with his poetry and philosophy. "Put your money in MMM and you will help a pensioner, an invalid, a poor person."

Born in Moscow in 1955, Mavrodi studied at the Moscow Institute of Electronic Engineering. In the dying days of the Soviet Union, he started businesses selling computer kit and pirated videos a business that morphed into selling "vouchers" promising a 10% weekly return.

MMM got its real start when he started "advertising aggressively on television" during the Yeltsin era, says Bloomberg. By 1994 it had ten million depositors, "making it more popular than the voucher privatisation programme that was supposed to give regular Russians a chance to take a stake in formerly state-owned enterprises".

Mavrodi escaped arrest then by being elected to parliament on a groundswell of support from investors. It seems clear he intends to try the same tactic now, says Kyivpost.com. An MMM political party has been formed and he will run in the upcoming parliamentary elections in Ukraine even if, as he concedes, "not everyone understands our goals".

Why investors fell for the track-suited messiah

Many saw the original MMM as a "national tragedy," says Igor Ogorodnev on RT.com. But as it repeats as "farce", Russians have embarked on "a bout of national soul-searching". While it was easy to blame the success of the original MMM on financial naivety (Russians had never seen a Ponzi scheme before), in 2012 that excuse doesn't wash. It is surely an indictment of our financial system that "many would rather trust a convicted criminal than a bank".

Lots of Mavrodi's investors "see him as Robin Hood", psychologist Olga Makhoskaya told Vzglyad magazine. "He gives a promise to those who have lost out in modern Russian society that they too can have a piece of pie." In his current incarnation, she says, Mavrodi is "the track-suited messiah for a materialistic cult".

"Former depositors say Mavrodi exerts a kind of spiritual hold over his followers," says Jason Bush on Reuters. But greed has a role to play too. People know how Ponzis work: first in, cleanup and they "hope they will be smarter, more cunning than others", psychologist Akop Narvazyan told Russia's Channel One. "It's adventure-seeking." They certainly have an inspirational role model in Mavrodi, says Tai Adelaja on Russia Profile. Married to a beauty queen, he went on the run in 1997 after being charged with tax evasion and was caught in a dramatic police raid in 2003. His book, PyraMMMid, was later made into a film.

So why doesn't Russia simply outlaw Ponzi schemes? asks Bloomberg. The answer is an extreme version of caveat emptor. As one parliamentary deputy explains: "There is a general rule that you should not stick fingers in the electrical outlet, but there will always be people who do that. It's the same with Ponzi schemes... All the government should do is issue a warning."

But with surveys suggesting that around 25% of Russians support the schemes, the truth may be that the authorities are simply too nervous to crack down harder on them.