It's a warm afternoon in Lagos. A woman is in a salon trying to get her hair done when everyone else there present descends on her with their lashing tongues.
She tells them MMM is a scam, but they laugh at her, telling her about their own returns. But what the heck is MMM anyway?
No, it has nothing to do with M&M's.
Someone is going to help us explain. Let's call him Owoblow.
Now, Owoblow 'invests' money in the scheme. 50,000 naira to be specific. He has been promised he'll get a 30% profit in 30 days. Because it is a system that encourages people to "help each other", Owoblow is advised to bring in as many people as possible. 10 people sign up. Each of them 'invests' an average of 30,000 naira.
In 30 days, Owoblow has now made a profit of 15,000. Now, he's cashing out 65,000 naira. His money was not invested in any business, or stock, or online betting website, but somehow, he's 15,000 naira richer.
His 15,000 naira was funded by the 10 people he signed up, who paid in money. Bear in mind that each of the 10 people are also going to try to sign up, let's say, 10 people each. That's 100 more people.
In 30 days, each of those 10 people are going to get paid from the money their individual 10s have brought into the system.
It's like a relay race, where new people just entering the pool fund the people previously in the system.
Let's go back to Owoblow. He's glad he just made 15,000 naira. He starts to think "what if I put in more money, that would clearly mean more profit."
So he puts all 65,000 naira into the system. In 30 days, he's going to be expecting 84,500 naira. Jackpot.
When the scheme sees that Owoblow is committed, they suggest better ways to help him blow more. Like ways that 84,500 could actually turn to 100,000. The most likely way, is that they tell Owoblow to leave his money in the system.
Of course he likes the idea. His money is working for him, he believes.
This is where things start to get tricky.
First of all, ponzi schemes are mostly unregistered businesses, and therefore illegal, in the business sense. While many ponzi schemers will rather call themselves "Social Finance Network", money still changes hands, and tax-collectors always want a bit of the action. So sometimes, they come and shut down operations, and the money belonging to investors is gone forever.
In most cases, the people running the scheme just close shop and disappear with the people's money.
Let's say the people running the scheme are saints and all that, problems can still come up.
One of the most common problems is this; this system is solely dependent on more people entering the system and bringing in money. When the money coming in is not enough to pay out the 'investors', the house comes crumbling down.
Sometimes, when there's heavy withdrawal of money by 'investors', the system crashes. Guess what time of the year people like to have money the most? December.
The truth is, a lot of people make extra cash with ponzi schemes like MMM. The question of whether it is right or not is a personal, moral question. One thing is for sure, the system is unsustainable. The house always falls on itself because of one of these factors.
Remember that game we played at birthday parties when we were kids? We'd dance around chairs, with one chair short. When the music stops, everyone gets to sit down except one person, the loser.
When the music stops and the ponzi house comes crashing, you really don't want to be the person standing.