It looks like the WSE is in the spotlight again, and not in a good way, again. From the sounds of it, the WSE has defaulted on a scheduled payment of the Hope Capital Bond (WSE: HCB), this payment was worth about L$650,000 of income and Midas Bank had upwards of L$3.5 million invested in the HCB, and relies on the bond payment to fund the depositor’s reserve.

Ancapistan Capital Exchange (AnCapEx) Chairman IntLibber Brautigan agreed with a statement by Midas Commons in which a boycott of the WSE was proposed until it made good on its bond payment.

“LukeConell is not a fraud or theft master,” said Smithers Daviau, a representative of the WSE present at today’s gathering. Aside from statements and excuses from Smithers and one other WSE employee, however, regard for Second Life’s oldest and arguably most opaque securities exchange was not so positive.

Commons further reported that the bank currently had around L$8 million on deposit, and a total loss of value in its HCB holdings would represent a loss of about L$5 million – and unavoidable bankruptcy for the financial institution. Source: Updated: Midas Bank in limbo; Commons and Brautigan call for boycott of WSE

From a statement on the WSE website, they say they are not responsible for the financial decisions of the Midas Bank and that the management team if fully responsible. They have delisted the following Midas Group of companies to ensure that shareholders will have the best possible chance to earn a return on their investments through capital growth and dividends using the WSE Traders Fund.

Midas Commons, CEO of Midas Bank yesterday informed the World Stock Exchange that the Midas Group of Companies are bankrupt.

The WSE accounts controlled by Midas Commons were locked while we reviewed the situation.

The cause of this bankruptcy is not our concern as the WSE is not responsible for the decisions and actions of Midas Group and its management. Midas Group and its management team are responsible for all the financial and operational decisions.

The WSE has believes that the Midas Group of Companies were Over-Leveraged and did not hold sufficient cash reserves to allow for the potential risks and impact of increased customer withdrawals, lower than expected earnings from investments along with regulatory and economic challenges. Source: Bankruptcy of Midas Group

I agree completely with Lowell Cremorne of SLOz and have asked the same question myself during the Ginko Financials fiasco.

What this latest drama reinforces is the fundamental problem with the unregulated financial system in SL - why would any serious investor look at a system where there’s no regulation and multiple stock exchanges that publicly criticize each other’s viability? One of the main value propositions of Second Life is its freedom, but this is one area where too much freedom may be one of the virtual world’s major pitfalls. Source: World Stock Exchange - the latest controversy

More coverage:

WSE announces Midas Group are bankrupt The full statement (below the fold) makes interesting reading in one paragraph saying “the reasons are not our concern” and in the next explaining why they think the bank went under. Nothing to do with late payments from their own bonds of course. The value of the various Midas Group bonds have been transferred to the WTF rescue scheme, straining it yet further.

Midas Bank the next… Looks like it is 5 to 12 to get all funds out of SL. There is no more trust left in any bank or investment….sadly I think it would be better if one starts to legally track down these individuals in RL and get that continued fraud resolved once and forever.

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