Bitcoin prices have recently reached a peak, possibly due to the rise of a Russian Ponzi scheme in China. If so, it is a reminder to those who believe that a monetary revolution is coming, that Bitcoin is still a medium for largely illegal transactions and that the so-called revolution is unpredictable. Last Wednesday, the price of Bitcoin hit a record high of $441. It fell to $389 on Thursday, but it is still up 63% from the beginning of October. For more than two years, many transactions using cryptocurrencies have also begun to appear in the Chinese trading market, appearing in transactions with the RMB. So it's not unreasonable to say that one of the reasons for Bitcoin's peak is the Chinese market. Indeed, in late October, Bitcoin trading volume soared to 3 billion yuan in one day, compared to less than 700 million yuan (about $110 million) a month ago. By Wednesday, the volume reached 5 billion yuan (about $787 million), which is equivalent to $300 million worth of US dollar transactions. There is a theory that Chinese investors have been looking for new assets to invest in after the stock market bubble burst. This theory makes little sense, because Bitcoin trading is very volatile and the trading links are relatively weak, which is not a paradise for investors. Another theory that sounds more likely is the growth of MMM Global registrations, which is found in the latest research of Russian mathematician Sergey Maloti. Sergey Maloti established the pyramid scheme as early as 1994. A study by Alexa.com, a website with a high click rate, found that mmmglobal.org began to grow rapidly in late September, just before Bitcoin reached its peak. The countries where the website has emerged are: India, South Africa, China, the Philippines and Brazil. “We cannot deny that MMM has recently pushed the value of Bitcoin to a peak to a certain extent. MMM’s new investment model has attracted many investors, but it is not a sustainable investment model,” Astrid Tao, CEO of Huobi, one of China’s largest bitcoin exchanges, told Bitcoin Magazine. That's a bit of an understatement. The global version of the MMM website offers a 100% monthly return, and a lesser 30% in China. Both versions emphasize that MMM is not "a high-yield investment program"—the main form of a modern Ponzi scheme. Regardless, what Maloti has created is legally sound. Initially, the 1994 version of MMM billed itself as an investment firm that could generate large monthly returns by investing in Russian privatized companies. At the time, Maloti was the largest buyer of Russian TV ads, and MMM even paid for a day's operating expenses for the Moscow Metro. As a result, people flocked to invest their life savings in MMM, and some even sold their houses to raise the money. But the money for MMM's later investors was provided by early investors, and the plan went bankrupt after six months. It's difficult to calculate how much money Maloti owes his "investors", but the amount is probably in the hundreds of millions of dollars. After a brief foray into politics in order to obtain parliamentary immunity, Maloti disappeared. Incognito in Moscow, he ran a website called Stock Generation, a global Ponzi scheme that traded shares of fictitious companies on the floor. It also went bankrupt. The SEC tried to take it to court. In 2003, Russian police finally arrested Maloti, who served a three-and-a-half-year prison sentence. He wrote several books in prison, one of which was a sensational account of the MMM story and was later adapted into a Russian film. In 2011, Maloti returned to the business world. He perfected the scam: MMM's 2011 version of the site did not have a corporate center, but was run as a social network where a virtual product called Malo was traded. Participants were divided into small groups managed by early investors. Maloti made "quotes" for Malo himself, then used some of the money for advertising and other money to keep the scam running. MMM's 2011 site even included explicit warnings that it might be a pyramid scheme. After its collapse, several former Soviet countries launched criminal investigations. But Maloti's website clearly stated that it did not offer any guarantees and that participants had to gamble with their own money. Maloti's latest scam is a masterpiece. It's also a social "mutual aid network" where people can trade "malo", but this time it's integrated with Bitcoin and social networks, especially Facebook. Participants accumulate malo by "helping others" - which is converted into Bitcoin - and then they increase their malo yield by promoting the scam on their Facebook pages, posting testimonials on the MMM website, and completing other tasks. The scam is flawless because Bitcoin is not a universal currency (the People's Bank of China even issued an official notice on this in 2013), the organization itself is decentralized, and the participants are autonomously promoting the scam. Alexa said Facebook is the largest source of links to mmmglobal.org. What makes this latest scam perfect is the circulation of Bitcoin and the lack of government connection. If people are willing to trade money for non-currency, and willing to circulate between each other in exchange for another non-currency, then it's not Maloti's fault. No one will be punished for participating in this scam, and once this scam goes bankrupt, Maloti can start another one: if his business has taught him anything, it is that there will never be a shortage of gullible people and gamblers. He already has a grudge against the local government, and when he backs up his scam, he uses quasi-Marxism as a cover, just to make people angry at the dodgy and lazy bankers and government. When Bitcoin enthusiasts helped spread the word about the system and keep it going through the storm, they were not thinking things through. But high technology is only a means to an end. The same Bitcoin database—the way it registers transactions—that Nasdaq uses can also be used by MMM, allowing it to continue inviting the next user in an unregulated space. | 
