Russian businessman sentenced to 4 years in connection with pyramid scheme

Photo: Russian businessman sentenced to 4 years in connection with pyramid scheme

A businessman was sentenced to 4.5 years in prison in Saturday in connection with a pyramid scheme in 1990s. This kind of fraud was common for Russia transition to capitalism.

The Chertanovsky District Court found Sergei Mavrodi guilty of large-scale fraud, Judge Nadezhda Markova said in a verdict broadcast on NTV. He was also fined 10,000 rubles (US$390; EUR285). Russian news agencies said Mavrodi could go free by the summer, however, because he has been in detention since 2003.

Mavrodi denied the charges and said he would appeal.

At least tens of thousands of Russians, possibly millions, are believed to have fallen victim to the MMM investment fund, which Mavrodi founded. At the time of its collapse in 1994, analysts said it was classic pyramid scheme in which no shareholder money was invested and initial customers were paid returns from shares bought by new victims. Many investors lost their life savings.

Mavrodi was jailed for four months in 1994 on charges of tax evasion and obstructing an investigation, but was released so that he could run in parliamentary elections. He won the seat, thus obtaining immunity from prosecution.

In 1995, Mavrodi's fellow lawmakers voted to revoke his immunity, but he managed to evade authorities, apparently fleeing to Greece.

Police in Russia detained him in 2003.