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.”
Commentary
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
Related Posts on Virtually Blind
- Commentary: Ginko Bank Run Update – Day Four: "VB's primary coverage of the Ginko Financial bank run can be found in..." (5 comments)
- Commentary: Ginko Financial is Either Fraudulently or Negligently Managed: "I've been capturing data off of Ginko's website the last two days,..." (41 comments)
- Ginko Financial Selling Server on eBay: " According to the official site, Second Life's Ginko Financial is..." (5 comments)
10 Responses to “Ginko Financial Suspends then Limits Withdrawals; Head ‘Nicholas Portocarrero’ Calls it a “Bank Run,” Tells Depositors to “Calm Down””
Leave a Reply
Notes on Comments: Your first comment must be manually approved, but after it is you'll be able to post freely with the same name and email. You can use some HTML (<a> <b> <i> <blockquote> etc.) but know that VB's spam blocker holds posts with five or more <a> links. VB supports gravatars. Got a gravatar? Use the associated email and it'll show with your comment. Need one? Set it up for free here.
[...] News of the bank run was first reported by the Virtually Blind website, which covers legal issues in virtual worlds. [...]
[...] While no official explanation for either occurrance was given on the Ginko homepage, a recent interview with Reuters and the story on Virtually Blind gave us a few more details. Portocarrero implied that the run on the bank may be related to the new gambling ban and the recent troubles at the WSE. His advice: “calm down, [and] stop keeping vital day-to-day cash in Ginko Financial”. [...]
[...] At 6:00 PM SLT, Ginko claimed that it had L$192,378,551 in “Total Deposits.” Three hours later — after a day during which Ginko head ‘Nicholas Portocarrero’ said a “bank run,” occurred — Ginko reported L$194,462,018 on deposit. In other words, Ginko claims that its total deposits increased by L$2,100,000 (about US$8000) during the three hours between 6 PM and 9 PM SLT, at the end of a day during which depositors were withdrawing money in a what ‘Portocarrero’ described as a “panic.” [...]
I interviewed Nicholas last year as well:
http://www.knowprose.com/node/16454
His comments on Grameen Bank are interesting.
More history:
http://www.secondlifeherald.com/slh/2005/10/virtual_market_.html
http://www.secondlifeherald.com/slh/2005/11/anshe_declares_.html
[...] VB’s primary coverage of the Ginko issue can be found in two posts below, but there a few important facts are worth highlighting today. [...]
Quote “Our congradulations to Thurston Hallard, who won L$25,622.10 in today’s final drawing.” Unquote.
Maybe Luke Connell at WSE would be interested in this seeing as Thurston is one of the 2 main accounts being investigated for fraud at the WSE. My money is now out of Second Life as i know this is the start of lots more clamping down by LL. ( I might add that this is not down to LL) it is down to the california state law. Please read this article as Gwyn seems to have inside knowledge of LL and is not a Linden.
http://gwynethllewelyn.net/articlecategory/homepage
[...] Ginko Financial Suspends then Limits Withdrawals; Head ‘Nicholas Portocarrero’ Calls it a “Bank Run,” Tells Depositors to “Calm Down – This is where it begins. Ginko Financial was a “company” in Second Life that let people “deposit” Linden dollars (which may be legitimately traded for real money and are, thus, real, legal assets) and then withdraw them from virtual ATMs. It pitched itself as a bank, but the difference was that it was claiming it would return outrageous rates on your deposits. They were promising .19% daily return on your money (compounded that’s 100% annually!). How could they achieve such an absurdly high rate of return? Clearly, they could not, and were simply funding the returns on initial deposits with the money people deposited later on. A Ponzi scheme, in other words, as noted by The Journal of the Business Law Society at U of Illinois Law College.As Benjamin notes in this article, a few days ago Ginko Financial stopped letting people withdraw money altogether and then began limiting their withdrawls to about $19/day, claiming that they had “invested” most of the deposits and couldn’t provide liquidity for their depositors. The head of Ginko, who is so trustworthy he won’t even reveal his actual, real-life name (Benjamin ferreted it out however. It’s Andre Sanchez), advised depositors to ‘calm down.’ After all, when you’re ripping people off you want to do it in peace and quiet. Who wants to listen to a bunch of your scam victims bitching at you? You’ve got free money to spend! [...]
[...] [Editor’s Note: On July 27, 2007, Ginko Financial suspended withdrawals, apparently in the wake of Linden Lab’s decision to ban casinos. Because of Ginko’s near-complete opacity of policy and investments, it is unclear exactly how the casino ban is impacting Ginko. As of 9:00 AM SLT, Ginko’s website states that withdrawals are again allowed, although temporarily limited to $L5k ($19 USD) per day per depositor (down from $L300k ($1100 USD)). However, the users I spoke to attempting to withdraw funds today were unable to withdraw even that amount. VB repeats its advice that people thinking of depositing money at Ginko carefully evaluate this company and the risks that they, personally, are willing to take, before depositing.] [...]
[...] Second Life, First Bank Run The Bloggers from Virtually Blind cover this story: One of Second Life’s high-interest, self-styled ‘banks,’ Ginko Financial, suspended withdrawals this morning. Ginko head ‘Nicholas Portocarrero’ (who has not previously made his real identity public, and declined to do so now) said Ginko clients are unable to withdraw funds because Ginko’s ‘L$ 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.’ [...]