From SLX Forums: WSE Not Re-opening

Ever heard of a bank run? No RL bank has enough funds on hand to pay out all their customers.

Hi Snow!

hmmm ... I suppose they could, or could have. I don't know about WSE, but in Ginko's case Nick made this hard, since his whole magic "investment" model was based on sinking money into RL investments, so as soon as anyone gave him money I'm sure he moved it out into invisible RL accounts. It just never came back ....

I doubt LL will get involved in the payouts or lack thereof of SL banks. Tho if I were them I would at least try a scare tactic to encourage payouts to customers. For example, have LL's lawyers send a letter to the typists for all avatar officials of known banks stating that LL intends to cooperate fully with any lawsuits that may ensue from failing to make good faith efforts to pay out. Also stating an intent to permaban and IP ban any typists that appear to LL to have not acted in good faith. It's their service, LL says explicitly in the TOS that they can deny service for basically any reason.

Haven't read the other WSE threads, so am shutting up now.

/me admires snowman's sleek self and hands him a minnow

Ever heard of the Ginko bank run? They didn't even have enough funds to pay out all their customers after just a few days, with ATMs running dry despite the L$5,000 limit in place. Unlike JT Financial, Ginko initially allowed people to withdraw L$100,000 (instead of the usual L$300,000) when the bank run initially got underway...graudally dropping it to L$5,000 as time went on. Are JT Financial's funds really so limited, or are they just a much smaller bank? Have they informed their customers of exactly where their money is invested, so as to give them peace of mind?

Honesty and complete openness are the orders of the day now that their institution has been effectively wound up. That money doesn't belong to them any more. It's not theirs. Assuming they haven't spent it.

Good for them! JTF is one of the Players that has at least sounded like they were trying to handle it honestly, and if they follow through on this, that is very good. Personally I don't mind the idea of them placing a throttle on individual daily withdrawls, as long as they make it clear that in the long run all withdrawls will be honored. That is precisely what any REAL bank would have to do in a situation like this.

Virtually all RL banks take a large portion of their deposits and use them for loans, investments and other purposes. That is how they make their money - by using your money to earn higher rates of return on the loans and investments than they pay you. They only keep enough cash in the vaults to cover normal peak rates of daily withdrawls. When a bank closes, they have to liquidate those assets and call in those loans. That doesn't necessarily happen overnight. I'd be willing to bet that if 100% of any real-world bank's clients decided to pull out in less than a two week period, the only way the bank could cover all the withdrawls would be to take out loans with other banks. For most of these SL banks, the only way they could cover unlimited withdrawls would be to take out a RL bank loan while they liquidate their investments.

Oh sure there is - resources. Do they really want to employ people to police a banking system? The statement in the blog seems very clearly to show that they don't. They are going to outsource the registration and certification so they don't have to get into that legal mess.

It bothers me that people will lose money when the less scrupulous banks close - but isn't that just accelerating the inevitable?

LL are 100% doing the right thing with this - and I am glad they have listened to posters on this (and presumably other fora) where they have shown where this is such a huge problem.

Yes, for a few days, there were a few people who were buying GPBs, for various prices. Some people even stated that they would buy lots of them because they'd be valuable in the future! I can only hope that it was just some sort of financial trick and that nobody was actually that dim.

But, well, you know, the idea of the value of such things is immensely changeable, and they're not worth anything now, and they weren't ever going to be worth what they were stated to have been. They were certainly never going to be worth anything like what they should have been worth; their value has ranged from "outrageously low" to "none at all". They were only ever a sop to Ginko investors in the first place.

From what I gathered in FAQ in linden labs thread it says we can take legal action against those who commit fraud against like WSE, Ginko... if we can afford the attorney fees,etc they will comply.
And they also said stock exchanges were exempt from banking ban, it was up to them whether or not they thought they were doing some legal or not.
Personally I like to see WSE and Ginko sued.

JTF initially said they were not changing their withdrawal limits, then quickly introduced the limit.

They claim to have liquid assets to cover this, however that will take time. They have released statements to both group members and via their website.



RL banks would be in as much trouble as SL banks with a run on them like this, banks don't have all that money sitting there ready to pay out, if they did nobody would get any interest on their accounts. RL banks often have high interest savings accounts that you have rules about when and how often you can withdraw your money.

RL banks have investments and accounts which can be inspected to make sure that they have anything near the amount that they should. (Actually, RL banking is a bit of a scam too, but it is regulated to make sure that it can't cause horrific economic collapses.)

SL banks don't. SL banks are con-jobs until proven otherwise quite frankly, and amazingly none of them seem to ever want to provide any information at all that could prove them otherwise. Which would be because they are con-jobs.

Actually, I think there is. From what I've seen since I've been in SL, it's just not LL's policy to interfere unless they really have to. They don't police the system if they can possibly help it - they just facilitate it.

There are so many things in SL that they could "keep an eye on" or watch for, but that's not what they do. I imagine that's why they don't do anything about camping, despite the cries from a few people. They are not shaping SL in the way that some people would like them to - they are facilitating it.

Linden Labs only wants to investigate actions they are required by law or the courts, because they are required to do so.

Lol. Singapore Credentials

Ummm.

There is an audio announcement on their website. They talk about a new conditional trading system. It sounds like they are not offering interest but will be back. However, there are enough qualifying words there to choke a lawyer.

http://www.wselive.com/

As an aside, Luke sounds like a very nice man. I'm sure he won't run off with your money. Your fictional, simulated money for educational and role-playing purposes, that is.

As per the new LL ban, I strongly feel that stock exchanges are also banned.

They state in the ban that "it will be prohibited to offer interest or any direct RETURN on an investment (whether in L$ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter."

In these in world stock exchanges people buy the stocks because they expect a RETURN on their investment via dividends and/or stock value growth. People don't buy stocks for nothing. Thus the stock exchanges fall under the ban.

Another thing we should note. Yes, there have been a few banks which have run off with funds, but there have been a LOT MORE "CEOs" on the WSE and other exchanges which have run off with the IPO funds and left their investors with nothing. If anything, these stock exchanges make it even easier than banks to scam people, as you don’t need to do much more than fill out an application and eventually collect the raised IPO funds and run.

Lastly, it is very likely that these in world stock exchanges violate federal law in many if not all countries. They raise, in many cases, tens of thousands of dollars for these "IPOs". I don't care if you buy "tokens" with real cash to buy the "stocks" with. You can still convert those L$ and other "fictional currencies" (I hate it when people call them that) back into real world currencies. If anything, this is a way to launder money for illegal use, which is illegal and so bannable.

LL should have worded the blogpost better. Instead of naming it "Bank Ban" they should have named it something like "Virtual Finance Ban". The whole word "bank" just confuses everyone. It is obvious LL wants all virtual finance to stop unless you are a real world company with a real world government sponsorship.

It's not obvious to the WSE. According to the audio message, they will be back in Feb. Thoughtful post, though, and you are most likely right.