Nobody Fugazi is still all over the Ginko Financial closing and subsequent problems, such as depositors funds being transferred to the GPB, or Ginko Perpetual Bonds, at the WSE with no say or choice in the matter, heck they didn’t even get a shot at agreeing to the terms of service. So, if you did not have an account there, you had to create one, then sell them for less money than you ended up having in them, minus fees, but not only that, when you sell them some are converted to WIC’s, or World Internet Currency, which were originally created to allow people outside of Second Life to invest in Second Life companies. So, then he had to convert them to lindens and pay another fee. He sold 183,000 GPB and had 560 lindens in his account and 130.37 of these WICs, so, needless to say, he did not get the return on his investment that Ginko said he would and since he didn’t say how much he really received after selling, we may never know how badly he was screwed.

What I did not expect was to see a Linden balance of 560 Linden dollars for my shares? What the? Then I saw this ‘WIC balance’ that didn’t tell me what I could do with it. I didn’t ask for these dumb WIC whatever’s, I was just selling GPB so that I could cash out the Linden dollars. Why couldn’t I just get Linden dollars? So I tried the World Internet Currency ATM link, and it was asking me for my WIC account name. I try ‘Nobody Fugazi’. Not happening. I try it lower case. Not happening. After a lot of searching he found this:

WICS to Linden Dollars

You can buy Linden Dollars using your WICS by visiting the WIC Exchange ATM located at Hope Capital Island in Second Life. For a direct teleport please visit the ATM Locations page in the Education Centre.

USING THE FICTIONAL WORLD INTERNET CURRENCY IS SUBJECT TO THE TERMS OF SERVICE BY WIC EXCHANGE PTY. LTD LOCATED AT WWW.WICEXCHANGE.COM

What should have taken me about 2 minutes to do took me about 45 minutes to do. Why? Is this something which is supposed to garner good faith? If so, it is as misdirected as just about anything else I can find.

As far as I’m concerned, any fees I paid WSE or wicexchange.com were stolen. The sign over WSE should say, “Here There Be Muggers, Pickpockets and All Manner of Thieves”. I was mugged, and other people have been and will continue to be mugged either by incompetence or a complete lack of ethics. Right now, I think it could be both. Source: How WSE Is Screwing GPB Holders Even More

More info on the WIC’s here.

Popularity: 3%

Here is another good idea that is long past due, the Second Life Banking Sector Open Forum.

Travis Ristow, Eliale Morigi and Arbitrage Wise did field a lot of questions, though some were redundant and at points the forum degraded into name calling and standing on soapboxes. That said, in my opinion, it was actually good overall though the transcript which I got before and after I crashed is long and meandering at times. Some good stuff came out, which I will likely cover in a subsequent entry.

There are even a few swipes at me in there, as well as a swipe at Your2ndPlace.com! I’m flattered.

There was an agenda which was kept to:

1. Introductions:

2. OverView of current events/financial Market

3. Brief overview regarding banking in sl

a. What is banking in sl
b. Safety & Liquidity
c. Private Insurance

4. Need for Regulation or at the very least independently verified transparency.

Questions and answers 1 HOUR

Be sure to check out BCX Bank at the ISE stock exchange! BCX is currently in IPO -
For more info contact Travis Ristow. Source: First Annual Second Life Banking Sector Open Forum; Majority of Transcript

A big portion of the transcript is available from the link above.

Popularity: 94%

Ginko Financial DOSL (Dead on Second Life) as of August 8th at 7:30 pm sl time. Lots of coverage online.

Jitters in Second Life as bank shuts doors The 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.

Unable to pay depositors, Ginko ceases banking operations “Customers will receive one bond with a face value of L$1 for every L$1 they have deposited in Ginko Financial,” said Chief Executive Nicholas Portocarrero (real life: Andre Sanchez of San Paolo, Brazil) in a statement. “Each Ginko Perpetual Bond will yield L$0.03 or 3% of face value per quarter.”

The security was trading at about a quarter of its face value at 7:20 am Pacific on Thursday. When the bank ceased operations, it had about L$50,000,000 queued up for withdrawal.

Ginko Financial finally dead Nicholas Porocarrero finishes the letter with the comment:
“Ginko Financial will bounce back from this and if you stick with us, you wll not lose anything. If you must sell the bonds, then you must sell, but I advise against accepting low prices.”

Whilst I continue to maintain you should make your own choices about what you do with your own money, I’ve been fairly forthright in my attitude towards stock exchanges, so whilst I continue to wish Nicholas all the best, I, for one, will be selling, and if it hurts my pocket, well so be it.

Serious Questions: WSE and Ginko Financial Before the Ginko Financial uproar which has taken the spotlight - even with it closed - I was focusing on the World Stock Exchange (WSE) and some of the problems related to it. Oddly enough, the involuntary transfer of Ginko’s clients assets into Ginko Perpetual Bonds has gotten me right back where I started. Further, after I pulled investment from WSE - Ginko, which is linked to the WSE through Hope Capital, tossed me right back. Well, here I am - about $183,300L of me. And I’m small potatoes - some of the numbers I’ve had people confide in me are certainly worth a few calls to a lawyer.

Making Second Life More Viable for Investment As I wrote before, the community needs to take steps forward. These steps, as I wrote, include these demands:

• We want better investment or we will not invest.

• We want more transparency or we will not invest.
• We want more realistic expectations on our investments
• We want better policy from Linden Lab when it comes to these things.

Popularity: 3%

Ginko Financials is apparently experiencing a run on their bank, meaning everyone wants their lindens out of there, and who can blame them with all of the shady stuff that appears to be going on in the unregulated world of Second Life finance. What can be going on there that they still offer a .10 daily interest rate, which works out to about 44% interest for the year, a pretty good return no matter what the currency is, as a matter of fact it’s still too good to be true. Ginko’s interest rates have always been high, and most banks in SL appear to be offering rates that are too good to be true. So, combine the theft at the WSE, the problems with Ginko and the fact that lindens are not backed by anything and are pumped into Second Life at the discretion of the Lindens, and we have a recipe for disaster, and this recipe is about done. Check out the notice posted in the Ginko Financials website, I have pasted the relevant parts below.

About a week and a half ago, we saw an increased number of withdrawals; the time to speculate as to why this happened has since come and gone, so I will leave it at that. No matter what started it, the result is the same: We have expended every possible short-term resource, and are still unable to meet the current demand for funds. We have attempted several different things to remedy the situation (which is in short why the interest rates and limits have fluctuated wildly), but none of them turned into a viable permanent solution.

For the time being, we have decided to continue doing business normally, but leaving the withdrawal queue in place with an expanded L$1,000,000/day limit, to give an indication as to where the end of this situation may be. However, a realistic estimate could possibly extend in to the realm of several months.

For those of you who wish to withdraw your funds, you may wait in the queue, or cash out to Ginko Perpetual Bonds, which is currently the only option if you don’t wish to wait the seemingly indefinite period of time it could take to refill the reserves. Source: Ginko Financials

So, they are taking deposits still and they are then paying those deposits out to existing customers who are trying to get their money back. How is this possible and how can they “look” their new customers in the avatar and feel good about letting them think they are actually going to be able to get their money out. I read somewhere that they just kept a little bit of the lindens on hand and invested the rest, what happened to all of the money they took from depositors in good faith? Why have they not liquidated all of their holdings to pay back their customers? A post at your2ndplace, a great blog that has been on top of this the whole way, asks this question.

A Coincidence?

But there is something in common with HCL, GPB and GCS. Nicholas Portocarrero is the major shareholder in HCL - which, by proxy, puts him heavily invested in WSE. And guess who is listed on GCS and GPB as a Non-Executive Director? Lukeconnell Vandeverre, the CEO of HCL.

Is it a coincidence that these two names have been coming up a lot in the timeline since the WSE was ‘hacked’? Doesn’t it seem odd that when Nicholas Portocarrero is having trouble raising enough money to handle withdrawals that he would be investing in Hope Capital?

What’s going on here? I’m not saying anything - but there are the facts right there. How do we explain these facts? Source: Peering Into The Depths of Ginko Financial

Many have said that what Ginko is doing is illegal and most certainly fraud, and it certainly appears that way to me, taking one persons money in good faith and passing it right out the ATM into someone’s hands who are trying to get out of this mess. Benjamin Duranske of Virtually Blind.com has a huge post about the Ginko Financials troubles here, Commentary: Ginko Wrapup - No AVIX, IPO, or Funds and he says this won’t be over until someone is in jail.

If what you were saying was true, then they would close down deposits. What this indicates, to me is two things. 1) at some core level, they actually believe this might magically still work, and 2) they are hoping that as long as they leave it running, they won’t be prosecuted or sued.

But leaving deposits open when they go DIRECTLY from the depositor to the pocket of a previous depositor is so transparently criminal that I can’t even give them much credit for #1 any more, and I’ve been someone who has consistently said they bought their own nonsense, even as one of the loudest critics of their facially illegal methods.

Think about this — they knew how much money they had five days ago when they were offering 148% interest on 30 day term deposits. You think they’ll be paying those in, now, 25 days? Every penny that they take right now saying it’s a deposit that will earn interest is undeniably fraudulently received. Source: It doesn’t count for anything…

I wonder how the Lindens think their no banking policy because we don’t want to make everything complicated is working out now?

Added: Ginko Financials shutting down And Ginko Financial Closes It’s Doors (Updated:10:06 pm SLT - Now Official).

Popularity: 4%

This may be too late for some banks and stock exchanges, but the idea of creating standards for banking is a good one, and definitely worth looking into if you have lots of lindens and time invested in Second Life. Travis Ristow and Eliale Morigi will moderate this discussion and it will begin at 2PM SLT on the first floor of the BCX Bank HQ on Saturday, Aug. 11, 2007. This event is open to the public and everyone is encouraged to participate.

FOR IMMEDIATE RELEASE - Second Life, The Rookery (106, 119, 22) On August 11, 2007, BCX Bank in collaboration with The Rock Insurance Company and Crescendo Corporation will host their first annual SL Banking Sector Open Forum.

The purpose of this event will allow bankers, business leaders, and concerned SL residents to openly discuss the importance of establishing quality banking standards, methods to minimize risk, the importance of transparency, insurance and trust with the SL community.

Second Life URL. Via Your 2nd Place.

Popularity: 2%

The bank that I wrote about earlier, Ginko Financials, has doubled the limit on the amount of lindens you can withdraw to 10,000.

14 hours ago I wrote about the 5,000 withdrawal limit Ginko Financial had imposed; a recent check showed that the new withdrawal limit is 10,000 Lindens.

The Ginko Financial Website is also reporting this, but interestingly is not keeping track of what the withdrawal limit was; a previous post was edited with the new withdrawal limit.

This increase in the withdrawal limit demonstrates that the run on the bank itself may be on the downswing. Source: Ginko Financial Withdrawal Limits Raised to 10,000 Linden

I also just noticed that the article I quoted in the first post on Ginko Financials has added some commentary from the banks CEO who admits their customers were in panic mode and tried to withdraw more than they actually had on hand in the bank.

Second Life’s Ginko Financial was in crisis on Friday after customers panicked and attempted to withdraw more funds than the bank had on hand, forcing it to cap withdrawals to stave off insolvency.

“We are facing a bank run, which has depleted our available reserves,” CEO Nicholas Portocarrero told Reuters in a Second Life interview. He said the company would liquidate some of its assets to raise cash in an attempt to weather the crisis.

“Generally speaking though, I’m looking to borrow short term cash using them as collateral instead of liquidating them,” he said. Source: UPDATE 1 - Second Life bank caps withdrawals amid panic

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According to a post on the Second Life news center on Reuters website, Ginko Financials stopped allowing people to withdraw their lindens, causing concern among its customers about whether the bank has their funds should they want to withdraw them. Ginko then reopened the withdrawals, but capped it at L$5,000 when it had been L$300,000 previously.

Second Life bank Ginko Financial briefly suspended withdrawals on Friday before reinstating them with a limit of only L$5,000 per day, fueling concerns that the bank did not have sufficient funds if its customers attempt to flee en masse.

“We are aware of the withdrawal issues and are doing everything in our power to correct them,” the bank said in a statement on its website at 05:42 am EDT.

As with real world banks, Ginko only keeps a small percentage of its customers’ deposits on-hand at any given time, but unlike real world banks Ginko’s minimum reserves are not set or monitored by a financial regulator. Last year Portocarrero told Reuters that Ginko keeps about 5 percent of total deposits on hand.

According to the bank’s site, it has more than 18,000 accounts holding a total of L$192,275,403. Source: Ginko Financial under fire, caps withdrawals

It was unclear whether the ban on gambling caused any of this, as casino owners are trying to get some of the money they rightly feel that they wasted, especially if they were investing everything they were making back into the casino. In an article at Informationweek, one casino owner had been in contact with the Lindens to see what the impact of the FBI investigation would be and they told him as long as they operated according to local state laws. Then they slammed the door on them.

Popularity: 2%