In the footsteps of Leni Golubkov: financial pyramids in Russia have blossomed again

– What caused the current rise in the popularity of financial pyramids?

Safiulin: “Times are hard now, and in a crisis there is always a surge in fraud. Let’s remember the 1990s. It was the era of the “great” financial pyramids: “MMM”, “Vlastilina”, “Khoper” … 2008, the financial crisis – another peak of fraud. 2014 is the era of microfinance pyramid schemes. 2017 – the emergence of cryptocurrency pyramids. In 2020, during the coronavirus pandemic, a new wave of massive financial fraud began, which is still gaining momentum. This year, perhaps, a record for the creation of financial pyramids will be set: about 2 thousand. Why? The fear factor increased infinitely among the population. People often do not make rational decisions, critical thinking is turned off. Well, then everything goes according to the scenario that the scammers came up with.

Shelishch: — The Central Bank has already drawn attention to the fact that the rapid growth of risks for consumers of financial services in recent months is due to the peculiarities of the economic situation. This is practically a direct quote from one of the documents of the Bank of Russia. People are confused and think about how not to lose their savings, how to save or increase them, how to get the opportunity to manage frozen assets. And if they do not find a rational answer, this pushes them to not always deliberate actions.

Why do Russians keep falling into the traps of swindlers? Everyone remembers the giant MMM scam and Sergei Mavrodi, books have been written and films made about it. But many still believe that free cheese can be not only in a mousetrap…

Lazareva: – By the way, we have a special project, it is called “Moshelovka” from the word “swindler”. Thanks to him, every day we identify one or two pyramids and send information in the form of checklists to the Bank of Russia. In fact, there are many more cases of fraud. During the year we processed over 30,000 signals. I think that financial pyramids are, first of all, very aggressive marketing: involvement, informational pressure, “bring a friend, you will earn more” programs. In fact, for the entire time of the existence of financial pyramids – and this is several centuries – nothing has changed in their essence. People are promised super high interest and absolutely fantastic technologically unexplored projects with supposedly mind-blowing returns. A person can learn about the pyramid from several sources at the same time. There is a constant information heating, zombification of the population. Well-known media personalities are often associated with such advertising: bloggers actively advertise pseudo-investment consultants, pseudo-brokers. There are a lot of offers of easy earnings on cryptocurrency. Most of the fraud that we are currently seeing on the Web is based on the legends of investing in super crypto projects. It is immediately clear that people have mastered marketing. There is a significant amount of advertising. There are more and more new “leaders” of some investment movements. It happens that an account is a month old, and it already has a lot of subscribers. Naturally, all this is easily monetized. At the same time, the audience targeted by scammers is getting younger. Now 50% of those affected by financial pyramids are young people, 50% are older people. The latter are deceived more offline. But, I repeat, financial pyramids are very strong marketing. For example, it happens that the authorities cover up a fraudulent organization, and then people write bundles of letters: “Why don’t you let us earn money?” – and begin to protect the organizers of the pyramids.

Safiulin: – Young people, unfortunately, do not know who Lenya Golubkov and Sergei Mavrodi were. Every 10 years, people’s memory is “reset”, which also contributes to the growth of fraud. But you need to understand that the root cause of the problem is, of course, a fraudster who came up with another scam, and people are victims who sometimes become consciously so. There are people who are risk-oriented. They know that these are financial pyramids, and they are ready to participate in them in the hope of making money. But there are also naive citizens who do not quite understand what is happening. Fraudsters rely on both.

Shelishch: — The website of the Bank of Russia has a list of companies with identified signs of illegal activity in the financial market. So, in one day, 18 companies were added to it. This suggests that the means of protection taken by the financial authorities and law enforcement officers do not always work. In the first half of 2022, more than 45 criminal cases were initiated. Only a small part of these criminal cases reach real sentences. And this meager number of punishments speaks of the risklessness of this kind of illegal business.

– How are financial pyramids disguised, can an unprepared person independently figure out scammers?

Lazareva: – The first thing that should alert a person who is offered to invest his funds somewhere is a very high profitability and attractive conditions. Agility is the next suspicious indicator. Often a decision needs to be made quickly, right now, without a moment’s hesitation, otherwise the “unique opportunity to earn money” will disappear somewhere. Often scammers promise guaranteed profitability and absolute insurance – this does not happen in a real business. Another indicator of a pyramid scheme is bonuses for referring friends. Many good financial education programs have emerged in recent years. So, scammers imitate financial education projects, saying that “now you will learn, and then we will tell you where to invest money.” Other examples of fraudulent offers: investments, for example, in a cure for all diseases, in space flight, in new technological solutions that will save humanity from anything. Therefore, if you do not want to plunge into a financial pyramid, the first thing to look at is that the structure you have chosen has a license from the Bank of Russia, and secondly, there should be no guarantees of profitability. Investments are always risks, and serious companies never hide it.

Shelishch: – The main distinguishing feature is the promises (scammers call them “guarantees”) of income higher than the level of bank deposits. This is all obviously unrealistic. I would find it useful if it were forbidden to offer returns above some reasonable level in force in the banking system. And for such promises there should be appropriate consequences.

– As you yourself noted, among the investors there are those who are well aware that they face a financial pyramid, but hope to be among the winners. Is it really possible to make money on a financial pyramid?

Safiulin: – It is probably possible to make money in a financial pyramid, but someone’s local gain will be a by-product of its activity, dooming everyone to the loss of their money. You need to understand that there is no income or profit in the pyramid. This is a simple redistribution of funds between new participants and old ones. At the same time, if you suddenly won, then someone else lost. We can say that you got stolen money. It is simply unthinkable to talk about income here, this is immoral earnings.

Lazareva: – I can say that lately we have learned to identify pyramids at the stage of their formation: there is a black list that is regularly updated. If earlier we were constantly late with the reaction, now, if something similar to a pseudo-project is formed, we draw the attention of law enforcement officers to it. But yes, indeed, the number of criminal cases initiated is much less than the detected fraud. It seems to me that it would be great to do like in Kazakhstan: to ban bloggers from advertising pyramid schemes and introduce some kind of responsibility for those who do it. Thus, we could save a large number of citizens from financial losses. Another serious problem is that there are people who go from pyramid to pyramid and there is no way to stop them. They just love the process itself. We were deceived at “MMM” and continue to be deceived every time since then. Such a person is very difficult to protect. At some point, he becomes an adherent of constant investment in an unknown, but very “profitable” project.

– Since you always remember “MMM”, explain: how do modern financial pyramids differ from the fraudulent schemes of the past?

Shelishch: – The new schemes are completely different for the most part from the pyramids of the past. The vast majority – 80% – operate online, and they are no longer collecting cash deposits, but rather investments, bets in games, and other assets, mostly in the form of cryptocurrencies. Nevertheless, the formula of the scam remains the same: attracting funds from an increasing number of citizens by demonstrating the high profitability of investments of previous participants. In developed countries, there are a huge number of specially trained people who track everything that appears on the Internet using special algorithms. They do not just put them on some lists, but remove them once and for all from the Internet space. Why we don’t do this is the question.

Lazareva: – The Bank of Russia has the ability to block the activities of such fraudulent organizations. And this mechanism works. Over 3,000 fraudulent resources were blocked last year alone. They managed to block one of the resources in just 4 hours from the moment the fraudsters started collecting funds. But blocking a fraudulent site is one thing, and returning the deceived person’s money is another. I can say that in 99.9% of cases it is impossible to return at least something. Often, no matter how many cases are initiated, the organizers of the pyramids have time to leave the country.

Is it possible for citizens to get their money back?

Safiulin: — It all depends on the specific situation. You need to understand that if you communicated with someone in a messenger, in a telegram channel and you don’t have any documents, then, probably, in such a situation, you simply won’t be able to go to court and prove something. Another point: if there is still an office where scammers work, and you have some kind of contract, then you can confirm this in court. It is necessary to make a scandal, to attract the public, the media. It is necessary to behave as actively and aggressively as possible in order to snatch your money at any cost. And happy endings also happen with such a development of events. Our organization pays money to people who suffered in the pyramids. If a person went through all the procedures, and sued, and received a writ of execution, but could not return his money in any way, then by contacting our fund, he will receive compensation. But this can only be done once in a lifetime. 1.5 million people have already received compensation from our foundation. You can return only a fixed amount: up to 250 thousand rubles is paid at the expense of the fund.

Is it possible in principle to defeat financial pyramids?

Safiulin: – According to the National Financial Investigation Agency, 84% of Russians have encountered scammers in recent months. This is a staggering number. If we are talking about the fact that this year there will be a 200% increase in the number of pyramids, then we need to grab our heads and take urgent measures. Fraud will win only financial education of the population.

Shelishch: — Financial literacy needs to be developed, but this, of course, is not a panacea. Right now, I would suggest giving the Bank of Russia the right to pay specialized companies and private detectives remuneration for actions that made it possible to identify financial fraudsters, bring them to justice and compensate their victims for at least part of the harm caused. The amount of remuneration could be some percentage of the funds reimbursed.

Is it possible to stop the activities of fraudsters in the bud at the legislative level? Or does it all depend only on the vigilance and financial literacy of the citizens themselves?

Safiulin: – Administrative liability in relation to bloggers, artists, famous people who publicly declare their favorable participation in the financial pyramid should become criminal. This time. Second, we need to work on the anti-pyramidal article 172.2 of the Criminal Code. The article is already 6 years old, and its enforcement leaves much to be desired. Only a few dozen cases have been initiated, while we have thousands of pyramid schemes a year. It is necessary to tighten the legislation and introduce new penalties for the organizers of the scam. For example, confiscation of property. The swindler should not earn anything on his dark deeds. If it becomes unprofitable, then it will be pointless to start a scam. But so far, unfortunately, Russia is one of the kindest countries in relation to financial scammers.