As thousands of panicked investors in the ailing MMM investment fund clogged Moscow streets and stock exchanges Wednesday, government officials said they had little legal basis to prosecute the company's founders if and when the reputed pyramid scheme collapses.


Andrei Kashevarov, deputy chairman of the State Anti-Trust Committee, said in an interview that the MMM joint-stock company is likely to close down, leaving at least 5 million shareholders nationwide holding worthless paper.


He acknowledged that MMM was running a classic pyramid scheme, but he said Russian law was too vague and incomplete to punish the perpetrators.


"I do not see legal grounds for instituting proceedings against MMM," he said. "The legal system has too many gaps to be effectively applied to them."


Panic spread among investors Tuesday when MMM offices in Moscow stopped redeeming the company's shares, which had grown in value from 1,600 rubles in February to 105,600 rubles by Monday (from about $1 to more than $50 dollars at the corresponding exchange rates). Thousands spent the night outside the company's headquarters on Varshavskoye Shosse in southern Moscow, hoping the morning would bring better news.


A crowd of more than 10,000 people massed outside again Wednesday, some selling their shares to speculators for between 35,000 and 70,000 rubles apiece, though most held on, hoping that the riches promised them in MMM's massive advertising campaign could still be theirs.


MMM spokesman Sergei Brish told Russian Television on Wednesday night that the headquarters would remain open 24 hours a day, and that the company's 60 offices in Moscow would reopen Friday. He did not specify whether or not the offices would be purchasing shares.


The MMM joint-stock company, one of 22 MMM divisions, took off in January when it began to guarantee the price of its own shares several days in advance and launched advertisements that portrayed average Russians who grew rich by investing in the company Kashevarov of the Anti-Trust Committee said irresponsible advertising was MMM's most evident transgression. But he said that even though at least one MMM commercial did not comply with President Boris Yeltsin's recent decree on truth in advertising, he doubted the law could be fully implemented.


An official at the Finance Ministry, who asked not to be named, agreed with Kashevarov.


"Their promises to investors were only part of an advertising campaign," the official said. "The company's charter does not state that it has to quote shares and pay a 100-percent monthly return on them. So they are not breaking any law when they stop buying them.


"We warned investors, but they wanted to take part in this race."


The official added that the Anti-Trust Committee could in theory prosecute MMM using the Law on Consumer Protection, which includes punishments for companies that sell low-quality goods or services. But he said the law would be difficult to apply to an investment company.Representatives of Russian and Western law firms, as well as officials at the State Prosecutor's Office, declined to comment on MMM's status Wednesday.


Meanwhile, Russian television stations continued to air MMM commercials, sandwiched between news reports on traffic jams and metro stoppages near the MMM headquarters.


Boris Fesenko, a deputy director of the Ostankino Television advertising agency, said his company will "within a few days" stop running an MMM commercial promising unrealistic returns on investments.


But Fesenko said Ostankino would continue to run most of the company's commercials.


"MMM is a registered company and has a right to advertise on television," Fesenko said. "Yes, this particular commercial does not comply with a presidential decree on advertising, but there is nothing wrong with their other advertisements."


Fesenko acknowledged that MMM was a principal advertiser and its shutdown could result in serious financial losses for Ostankino Television. He said, however, that Ostankino managers were more concerned about observing the law.


"We'd like to see actual documents, saying that the company's activities were illegal or its commercials were against the law, before taking any serious steps," Fesenko said.


Even though stock exchanges continued trading MMM shares Wednesday, experts said the company was collapsing. Ilya Shkabara, stock expert at the Russian Raw Materials and Commodities Exchange, said the company would not be able to recover from the current crisis.


But other officials and experts said that the company, if it bursts, can avoid court proceedings and could even reinvest in other MMM group divisions the proceeds from the pyramid scheme it appears to have run.


Sergei Skatershchikov, director of the financial consulting agency Skate-Press, was optimistic about the group's future.


"They are definitely investing in something, though it is difficult to say what exactly the investments are," he said.


Skatershchikov said that MMM was most likely investing in the shares of large privatized companies.


MMM-Invest voucher investment fund, another large division in the group, owns a 10 percent stake in Russia's largest carmaker, AvtoVAZ, according to AvtoVAZ general director Vladimir Kadannikov.