|
Bank goes bust in Second Life
Jitters in Second Life as bank shuts doorsThe biggest bank in the virtual world of Second Life has closed its doors after a run on its deposits, putting at risk hundred of thousands of real dollars of savings and investments. On Thursday, Ginko Financial - which is owned by Brazilian from Sao Paulo whose real name is Andre Sanchez - stopped accepting deposits, froze all withdrawals and converted account holders' balances into "tradeable debt securities" called Ginko Perpetual Bonds. The bonds can be bought and sold on the World Stock Exchange (WSE), the largest of three sharemarkets in Second Life. The exchange is run by a Melbourne-based man whose real name is Luke Connell. Ginko attracted deposits by offering to pay 0.10 per cent daily accrued interest, which equates to a 44 per cent annual return. The bank claimed to have 18,000 accounts and deposits amounting to $US700,000 ($A800,000) in real money. The in-world currency in Second Life is called the Linden ($L) and it is freely convertible into US dollars at an exchange rate of $L270 to the dollar. The idea of unilaterally converting deposits into bonds is to buy time for the bank to replenish its cash reserves. Account holders can still opt to withdraw their funds, but instead of receiving par value as a depositor, they will only receive the market value of the security. Currently, they are trading at a steep discount to their face value. "There are a lot of people who put money in there and they are not going to get it out again," said Robert Bloomfield, a professor of management and accounting at Cornell University and a close observer of the Second Life economy. "For some of those people it's enough money that it's actually meaningful to them." In a note posted on the Ginko Financial website and on its network of virtual ATMs, the bank said it had been forced to take the action after a run on its deposits that was triggered by a recent decision by Second Life's owners to ban gambling in the virtual world. San Francisco-based Linden Lab ordered the ban after reportedly inviting the FBI to examine gambling activities in its 3D world. Legislation passed in the US last year makes it a crime to use credit cards or online payment systems to make bets on the internet. The Ginko notice said the bank began "experiencing a wave of withdrawals" after the ban was announced on July 26. "This led the funds we keep in reserve for day to day use to be exhausted, which evolved into a full blown panic depleting even our last line of cash reserves and resulting in the current situation, with about L$50,000,000 [$US185,000] queued up for withdrawal." Posted by: Delphi 2007-08-11 |
| http://www.rantburg.com/poparticle.php?ID=195903 |