250,000 people defrauded of US$765 million

Two men were arrested in Moscow, Russia, on Monday on charges of setting up a pyramid scheme that defrauded around 250,000 people of 18 billion rubles ($765 million), the Interior Ministry said.

"Two organizers of the criminal group have been detained — Sokolov and Dzhasybaeva, who operated under the firms names Region-Center, Garant Invest, and Garant Kredit. They have been brought to Tatarstan [in the Volga area] for investigation proceedings," a ministry spokesman said.

The company operated in 43 regions of Russia, promising up to 90% returns on what they claimed were investments in the housing markets of the Moscow Region and Montenegro.

The suspects traveled throughout the country giving seminars, and distributing literature containing dubious financial information and optimistic forecasts.

The spokesman said over 300 criminal cases have been launched into the scheme.

Numerous pyramid schemes sprung up in Russia during the 1990s, targeting investors who had grown up in the Soviet Union and had little exposure to Western-style mass marketing and almost no understanding of finance.

The most famous example was the MMM scheme, which bilked investors out of around $1.5 billion, depriving more than two million Russians of their life savings. Sergei Mavrodi, who founded the scheme along with his wife and brother, was released in May last year after serving a four-and-a-half-year sentence.

Thanks to Cluso for the tip