How the first financial pyramid in Russia was built: MMM from the 19th century

2024 Author: Richard Flannagan | [email protected]. Last modified: 2023-12-15 23:55

As you know, the most famous financial pyramid was organized by the British Lord Treasurer Robert Harley, the first Earl of Oxford, creating the scandalous South Seas Company in 1711. More than a century and a half had to pass for such a pyramid to appear in Russia. True, it had its own characteristics, and unlike the well-known financial scams of the late twentieth century, the creator of the first Russian MMM was never able to get rich.

Ivan Rykov

The formation of the Russian banking system, which began during the reign of Elizabeth Petrovna, at the beginning of the 19th century was already proceeding at a rapid pace. At the same time, the first commercial banks began to appear to replace the previously existing exclusively state-owned banks.

In 1863, a public bank appeared in the city of Skopin, and Ivan Rykov was appointed its director at the meeting, a person in the city is popular, but very controversial. He was orphaned at the age of seven, but the merchant Andrei Rykov took the boy under his guardianship. He gave the boy his last name, raised and kept him until his death. When Andrei Rykov died, Ivan, who was then 15 years old, got a very large sum of 200 thousand rubles for those times.

After just a few years, not a trace remained of the large inheritance. Ivan Rykov spent part of the money on the construction of a church in Skopin. This act endeared the local residents to him, instantly making Ivan Gavrilovich a respected and popular figure. Where the rest of the inheritance went, history is silent, it is only known that Rykov Jr. spent them on his own needs.

When Rykov's candidacy for the post of director of the bank was discussed, there were those who categorically objected to the 32-year-old carousel. However, Rykov, who worked as a burgomaster, was actively supported by the leadership, and he was a master of promises. The program of the bank's activities under his leadership looked very attractive, because the newly appointed director planned to spend a third of the income on the needs of the city, allocate the same amount for charity, and only the remaining amount will be spent on development.

At first it seemed that the Skopino merchants were not mistaken in their choice. In fact, quite decent sums were allocated for charity and the development of the city. However, soon all this correct life bored Ivan Rykov. His soul was thirsty for adventure, primarily financial.

First, he got rid of supervision by the authorities, winning the election of the mayor and transferring this position to his like-minded merchant Afonasov.

Personal accounting

Then Ivan Rykov personally started attracting clients' funds to his bank. He himself ran an advertising campaign, promising depositors 7 percent per annum instead of three that were paid by other commercial banks. At the same time, residents of Skopin were not listed among the bank's clients. Ivan Rykov was extremely reluctant to accept deposits from residents of the entire Ryazan province. The bank director did not need too frequent customer visits and prying eyes.

Depositors flocked to the Skopinsky Bank. And at first they honestly received the promised interest. However, the interest-bearing securities issued by Rykov were issued without any collateral and without guarantees. At the same time, they were bought and sold very quickly.

The financial institution's asset statements looked flawless. Shortly before the date of their publication in the press, paid statements of mythical clients and payment of deposits to them appeared in the bank. Accountant Matveev, who was personally friends with the director, masterly drew up a report, and then immediately went to the holy places to atone for sins.

Thanks to the money, Ivan Rykov received practically unlimited power in Skopin. He gave unlimited loans to rulers, and constantly extended the validity of debt securities. All decisions of the City Duma were made taking into account the interests of Rykov. During the elections, only the banker's like-minded people were elected to all key posts.

City employees received an additional "salary" from him. The collection of rumors about Rykov himself and the delay of unwanted letters about him were paid separately. People who were disagreeable to the banker were imprisoned on trumped-up cases, their enterprises could well have been burned down as a result of an "accidental" fire.

Ivan Rykov was feared and loved at the same time. Thanks to him, all residents of the city literally bathed in money, and the banker felt like the ruler of the souls of fellow citizens. But he was not going to stop there.

Coal scam and bank collapse

The enterprising Ivan Gavrilovich organized a study of coal mines near Skopin. True, there was little coal there, and the development of the deposit was unpromising. But Ivan Rykov already had an idea to create a "Joint Stock Company of the Skopinsky Coal Mines" and receive a very real income from a fictitious deposit.

The banker himself became the chairman of the joint-stock company, and the "shareholders" were the debtors of the Skopinsky bank, who allegedly invested two million rubles in its authorized capital. Immediately, shares were issued for the amount of the authorized capital and advertising campaigns began, which, however, did not bring any result.

But the banker was not going to give up, he immediately sent his people to the Moscow Stock Exchange, where for a year they created the appearance of buying and selling shares of his joint-stock company. The quotes, regularly published in newspapers, have invariably shown growth, and the idea of the profitability of the enterprise has become firmly established in the minds of citizens.

Rykov's permission from the Minister of Finance allowed him to exchange shares in coal mines for excise taxes on alcohol, receiving 75 real rubles for 100 fictitious rubles. Fortunately, the scam was quickly discovered, but then Rykov escaped punishment thanks to his connections and money.

But already in the early 1880s bad rumors began to spread about Rykov's bank, and soon depositors flocked to Skopin, but there was simply nothing to return their money to. In 1882, Ivan Rykov was arrested, and the investigation into his case dragged on for two years. During the hearing, which began only in 1884, interest in the trial was very high, and almost all the Russian media covered its progress. One of the journalists who wrote about the trial of Rykov and his “associates” was Antosha Chekhonte, who represented the “Petersburg newspaper”.

The investigation established that during the existence of the bank, 12 million rubles had evaporated, 11 were in unpaid bills, including Rykov's 6 million. 6 thousand depositors were deceived, whom Fyodor Plevako himself defended, but the deceived clients could not get their money back.

Surprisingly, during the management of the bank, Ivan Rykov did not make any fortune. He just burned money, wasting it on daily needs. Together with him, 26 people were brought before the court, five were acquitted as a result.

Ivan Rykov, by a court decision, went to serve his sentence in Siberia, and in 1897 he died of an apoplectic stroke in a hospital in Krasnoyarsk, forever remaining in history as one of the largest fraudsters and the founder of the first financial pyramid in Russia.

Another story took place in the Netherlands in the years 1636-1637 and so amazed society that it undermined its ethical foundations. The political climate in Holland has never been the same since then. This example, included in all textbooks, is remembered today when analyzing the prospects for cryptocurrencies.