Investigating MMM Ponzi scheme on Bitcoin

TL;DR

This paper provides an in-depth analysis of the MMM Ponzi scheme on Bitcoin, revealing its lifecycle, high inequality among participants, and global reach with asymmetric money flows, based on transaction data from 423,000 transactions.

Contribution

It offers a comprehensive analysis of the MMM Ponzi scheme on Bitcoin, highlighting its phases, economic impact, and international money flow patterns, which was previously not well understood.

Findings

MMM circulated over $150 million daily at its peak

High income inequality with Gini index over 0.9 among members

Victims who never profited increased from 0% to 41% in five months

Abstract

Cybercriminals exploit cryptocurrencies to carry out illicit activities. In this paper, we focus on Ponzi schemes that operate on Bitcoin and perform an in-depth analysis of MMM, one of the oldest and most popular Ponzi schemes. Based on 423K transactions involving 16K addresses, we show that: (1) Starting Sep 2014, the scheme goes through three phases over three years. At its peak, MMM circulated more than 150M dollars a day, after which it collapsed by the end of Jun 2016. (2) There is a high income inequality between MMM members, with the daily Gini index reaching more than 0.9. The scheme also exhibits a zero-sum investment model, in which one member's loss is another member's gain. The percentage of victims who never made any profit has grown from 0% to 41% in five months, during which the top-earning scammer has made 765K dollars in profit. (3) The scheme has a global reach with 80 different member countries but a highly-asymmetrical flow of money between them. While India and Indonesia have the largest pairwise flow in MMM, members in Indonesia have received 12x more money than they have sent to their counterparts in India.