Millions of Russians -- 10 million according to MMM -- have followed Golubkov's example by putting their money into what has become the country's first nationwide pyramid scheme. So rich did the company grow, so ubiquitous was its advertising, that it effectively paid for the World Cup to be brought to Russian television screens.
But Tuesday the doors closed on MMM throughout Moscow, preventing investors from selling their shares -- an indication that the sands have run out for Russia's first and largest pyramid scheme.
The company maintains that this is a temporary hitch. But even if MMM succeeds in finding a new lease on life and reopens its doors, as a pyramid scheme it must ultimately collapse. The question was never "if", but "when."
What has driven MMM's exponential growth is greed. People wanted to get rich just like Lyonya and this greed has nothing to do with being Russian. Nearly anyone who hears that $1,000 invested in February grew to about $50,000 by July sees visions of new cars and real estate and thinks: "If only I'd bought some shares back then."
So strong is the bond of greed that MMM president Sergei Mavrodi went so far this week as to call his investors a "political force" and use them in an attempt to blackmail the government by threatening to call a referendum on support for leaders who would try to stop the people from making money.
In the end it seems that the government, in issuing a public warning that MMM's latest share issues were illegal, may have damaged confidence in the company enough to dry up the enormous inflow of new investment that had kept the company alive.
If so the government will soon have several million very unhappy investors to deal with. Some of these will be disingenuous, knowing perfectly well that they have been playing a game of Russian roulette on a massive scale. Others are just naive.
When MMM does collapse, the hapless government will end up taking much of the blame. In truth, these kinds of pyramid schemes are difficult to control in a society that is going through as chaotic a transition as Russia. But some criticism will be deserved. The government, just as MMM's disappointed investors, will learn a painful lesson from the untimely death of Lyonya Golubkov.
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