(Beijing) – China's government has warned the public that a Russia-based investment website and others like it are illegal because they are running what appear to be pyramid schemes.

The Chinese arm of MMM, which was founded by a Russian ex-con named Sergei Mavrodi, presents huge risks to investors because it is operating illegally in the country and may have funneled funds abroad, according to an announcement on January 18 from the central government.

The warning said MMM China is among an emerging number of unlicensed organizations that aim to attract online investors with promises of high returns while employing a business model that looks to be a Ponzi scheme.

The websites often advertise themselves as platforms that facilitate "financial mutual assistance" to each other rather than investment services, the announcement said, and they encourage existing investors to invite others by rewarding them with money from the newcomers.

It also said these groups change their websites frequently and none of them was registered with the government.

"Such operating models present huge investment risks and their capital flows are not sustainable," the warning said. "Once the capital chain breaks, investors will face severe losses."

The announcement was published by the central bank, the banking regulator, the Ministry of Industry and Information Technology and the State Administration for Industry and Commerce.

The notice did not name any other website or say how many are of concern.

Caixin has found 10 other websites that brand themselves as a financial "mutual assistance" platform that operate in much the same way as MMM and promise monthly returns of up to 60 percent. Many of them claim to be foreign invested and have operated overseas for many years.

The government notice said MMM's founder, Mavrodi, served 4½ years in prison because he used it to defraud investors. After his release, he "resumed his old practice to carry out fraud," the notice said.

TMTpost, a Chinese business technology news and information provider, said MMM started looking for investments in China in 2015. Investors were told they were lending money to each other and were paid when they brought in new investors, the article said.

One investor told Caixin that a friend introduced her to MMM China. Skeptical at first, she invested only 2,000 yuan, but increased the amount substantially after receiving her first interest payment.

MMM says on its website it has operations in 107 countries with some 130 million investors. It is unclear how many of them are in China. The TMTpost report said the figure could be more than 1 million.

Several investors told Caixin the website closed in December, freezing their accounts without warning. A December 25 announcement on the website said investment cycles and interest payments would be calculated differently in the future, and all previous requests for withdrawals had been canceled.

Investors could still not get into their accounts as of January 19.

One investor said he'd asked the police to probe MMM China but was ignored, the TMTpost article said. The report did not say name the city in which the investor lives.

The police did not want to investigate because MMM and its Chinese operations are not registered in the country, the report said, and the organization does not have an office or servers in the nation.

Many investors seem to have known they were playing with fire. Said the woman who started with the 2,000 yuan investment: "Of course I knew the risk, everyone knew."

Several other investors said their plan was to escape before the scheme collapsed.

Some websites Caixin examined offered greater returns than MMM China. One called Motifinvesting.net said investors can earn a yield of 60 percent every month. It claims to be an offshoot of the U.S. firm Motif Investing and said it had attracted hundreds of thousands of backers since opening in China on December 9.

The website closed in December, telling investors it is updating its system. It said it would resume operation after the Spring Festival, also known as the Chinese New Year, which runs from February 7 to 13.

Caixin has been unable to reach anyone at MMM China or Motifinvesting.net.

(Rewritten by Wang Yuqian)