I will second your comments. If there is a law suit naming LL, they will shut the banks down to cover their you know what.

Outside regulation is simply not possible unless it becomes legal fact that L$ have real value. At the moment, its not clear which way the courts lean on this issue. If it does come down they yes, L$ = $, then LL has much bigger problems, namely the IRS. They would probably just do away with the L$ in that case, and that would end SL, effectively.

One big thing that LL could do is simply take the stance that if you use SL to perpetrate FL fraud, they will do all in their power to make sure the legal authorities have the information they need. That would mean the worst thing that could happen to you isnt a banning, but that your contact info gets turned over to a DA.

That said, I still think theres things we as SL players can do to regulate ourselves- a better business bureau model if you will. Commercial ratings agencies can form up and charge banks to review their accounting. In part, the sl insurance co, “The Rock” may fill some of this need. But again, there is always that underlying counter party risk. I can invest in a “bank” and insure my deposits with “the Rock”, but there is no guarantee that when the “bank” goes under, “The Rock” wont become “The Gone”.

(disclaimer: I got involved in sl when I came looking to stat arb their currency markets but found the fees to be drastically out of whack with the volatility. This type of model would not have seen me doing business with another avatar, but with LL/slexchange/etc’s currency markets, thus limiting my counter-party risk).

#40- I agree that educating people on these issues is hugely important. Part of the reason so many people are hurting from this Ginko fiasco is that they bought the line that Ginko was a “bank”. The believed their accounts to be “savings accounts.” These words have iron clad legal meanings, but also softer colloquial meanings. The soft meaning is that your money is safe.

There was a huge disconnect between what Ginko’s reality and the public face that Ginko put on. What Ginko was: at best a highly illiquid, high risk investment fund and at worst, a complete Ponzi scheme fraud. What Ginko claimed to be: a “bank” that paid “interest” on deposits made to “savings accounts”. Sure Ginko had disclaimers- their butt was covered- but even the disclaimer was ‘weasel’-y. It pointed out the risks: that they could go belly up, that they might not be able to cover withdrawls because the money is invested. I think this quote from their disclaimer is the chief bit of weaseling:

“We keep a healthy reserve in pure linden dollars to pay people who wish to take money out of their accounts, so almost all withdrawals are cleared within minutes, most being instantaneous.”

This turned out to be a complete fiction.

If Ginko had called themselves a “Hedge Fund” or “Investment Fund” or even just “Fund”, I dont think we would have the problems we have now simply because these institutions have colloquial meanings in first life that are associated with risk. Coincidentally, less people would have deposited funds. Ginko didnt take that tact, and they made a huge profit defrauding their depositors.

I would really hope this would be an opportunity to educate the public (SL/RL, if you can separate them in the blogs/press) on doing risk assessment for investment, that the FDIC isn’t there for all RL vehicles of investment either, and people should educate themselves on relative risk.

No one gives interest on money where there is no risk involved. Even your savings account in an insured bank is giving you interest for the privilege of investing your money into riskier investments that will, on average, yield far more to the bank than they will to your account.

But those who don’t remember bank runs or even the savings & loan bailout are doomed to repeat similar tragedies.

Shava Suntzu/Shava Nerad IRL
http://slbizreview.com

I’m new in SL as of Saturday, 8/11/2007, and while hunting jobs I discovered that an escrow and arbitration service does exist at that location. Apologies for not having it all properly linked, that newness bugs a bit.

Personally, I want to see arbitration and escrow services flourish as much as anyone. Frankly, I want to work there. I am a paralegal possessing an Associate Degree of Paralegal Study from Kaplan University. And beyond that, I also want to see a ratings or certification service also flourish. Beyond that, we need real companies offering real world things with SL as merely a medium of communication with all manner of transactions banned for such businesses.

And for those of you asking if laws transcend from FL to SL, yes they do. This is not interpretation, this is fact: LL has nexus in California and USA, this means they are subject to the laws of those jurisdictions, subsequently, so are all users. Nexus is established by substantial business presence and activities within a given jurisdiction.

http://www.answers.com/nexus&r=67

Beyond nexus, each user is subject to the laws in their own jurisdiction and potentially subject to the laws in each additional jurisdiction that other users are located in at time of action. Again, fact, not interpretation.

Frankly, any and all financial activities tht should involve a prospectus should be controlled by a chartered regulatory agency, not simply trust. Yeah, I trust that my meager handful of L$ will be there in the morning, but that’s as far as I’ll go with SL. It is true that regulators are practically incapable of keeping up with virtual worlds, inviting such abuse as what has and will happen. I would even suggest that LL offer a registry that begins a regulatory process, instead of leaving it to user owned (and potentially abused) institutions.