Ginko Financial Suspends then Limits Withdrawals; Head ‘Nicholas Portocarrero’ Calls it a “Bank Run,” Tells Depositors to “Calm Down”
July 27th, 2007 by Benjamin Duranske
One of Second Life’s high-interest, self-styled “banks,” Ginko Financial, suspended withdrawals this morning. Ginko head ‘Nicholas Portocarrero’ (who has not previously made his real identity public, and declined to do so now) said Ginko clients are unable to withdraw funds because Ginko’s “L$ reserve has been depleted.” He continued, “we are working to replenish it, but when we add it people drain it almost immediately. It’s a bank run in essense.”
Ginko’s website currently says that withdrawals have been reactivated, but that they are subject to a L$5000 (approximately US$19) per-day cap. However, as of 10:00 AM SLT, Ginko depositors said they were unable to withdraw even that amount. The cap was previously $300,000 (approximately US$1100).
During the two hours from 9:00 AM SLT to 11:00 AM SLT, Ginko’s stated “Total Deposits” dropped L$2.1m (approximately US$8000). That amount is just over 1% of Ginko’s total claimed deposits of L$192m (approximately US$750,000).
‘Portocarrero’ said that he believes the new gambling ban “caused a panic,” which then spread. He advised Ginko clients to, “calm down, [and] stop keeping vital day-to-day cash in Ginko Financial.” He continued, “a deposit is an investment, you are not putting the money in a box.” Ginko’s website echoes this warning: “we cannot guarantee that we will always have enough to pay people quickly, though we will endeavour to do so.”
Depositors remain concerned. One Ginko client, ‘RogueRadio Park’ said that he is, “distressed, because I have been unable to access even 1 $L of my savings there.” He said that the unavailability of funds, “has kept me from doing my job for the past twelve plus hours.” Another depositor, ‘Niecey Heart,’ said that she was able to withdraw only L$1001 (approximately US$4). Both ‘Heart’ and ‘Park’ say they plan to keep trying to withdraw funds today.
Ginko’s site claims that management is “doing everything in our power” to fix what it calls the “withdrawal issues.” Ginko customers are instructed “not [to] contact customer support regarding withdrawals being unavailable,” and told that “messages regarding availability of withdrawals that do not mention a loss of funds will be deleted.”
I’ve been following Ginko Financial since February, when a law journal concluded that it was probably a ponzi scheme and I noticed that Ginko’s yield had dropped 60% in 16 months. Though the rate has been raised since I ran that article, red flags still exist. These red flags include the fact that Ginko’s management categorically refuses to discuss Ginko’s investments or policies and the fact that (according to an interview Reuters previously conducted with ‘Portocarrero’) Ginko keeps only around 5% (and “sometimes less”) of its deposited funds available in-world in $L for immediate withdrawal by depositors. VB has always advised readers to be very careful regarding this, or any other company with near-complete opacity of investments and management, and repeats that advice now.
Updated 12:20 PM SLT, July 27, 2007
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