Panic Selling Prompts Closure of Investment Company Offices
MOSCOW (AP) _ Russia’s best-known investment company sharply restricted its operations today amid panic selling of its shares and fears by millions of investors it could collapse.
As many as 3,000 people gathered outside the company’s headquarters on the outskirts of Moscow, hoping to cash in their shares, the Interfax news agency reported.
The company, MMM, has been criticized by President Boris Yeltsin and others who say they are skeptical of its promises of huge returns. Tax authorities have filed charges against MMM affiliates, alleging tax fraud and other violations.
Sergei Mavrodi, the head of MMM, says the government is setting itself up for a confrontation with angry investors. He has threatened to seek a national referendum.
The panic selling began late last week when the government said it would not guarantee money in any of the numerous investment funds that have sprung up during the past year.
MMM stopped redeeming shares today at all but one of its Moscow offices due to ″events in the past days (which) provoked panic among MMM shareholders,″ said Sergei Taranov, the company’s spokesman.
″The sale of shares has been discontinued due to the disruption of the work of cash-delivery services,″ Taranov told Interfax.
By early today, there were 600 people on a list waiting to sell their shares at MMM’s central office - the only one still redeeming shares, he said. Police told Interfax as many as 3,000 people were outside the headquarters.
MMM, reportedly the largest investment company in Russia, says it has about 5 million shareholders. It has become the biggest name in the business through aggressive advertisement promoting dreams of easy money in the post-Soviet era.
Company officials, who only publish written statements in the media and refuse to give interviews, have said the fund speculates on currency markets, offers short-term business loans and invests in stocks.
Authorities, however, have criticized MMM and other similar companies, which promise returns of 400 percent to 1,000 percent a year. Some have called them classic pyramid schemes that inevitably will collapse.
Hundreds of smaller investment funds have folded, defrauding hundreds of thousands of people of millions of dollars. Those hurt have blamed the government for their losses and demanded compensation.