Financial Regulation in SL - STOP THE BANK FRAUD!!

I would like to know when LL are going to wake up to the massive frauds that have taken place recently in the banking and financial areas of SL. We all remember Ginko and now we have the collapse of AVC, KFM and CGI which were behind The Bank - the last few days have seen people losing MILLIONS of L$ when Jasper Tizzy, Teanna Nomura and PaydayLoan Lindman cashed out and ran.

The casino business was NOTHING compared to the huge gambling losses that have been incurred by people betting on the price of (apparently worthless) stock. If casinos were banned because of state law then surely the state laws covering banking & finance should be applied too??? Why haven't the FBI looked into that one... I suggest they do.

As for the culprits behind AVC, CGI and KFM - those folks will have alts, and LL will know who they are. Surely it must be unethical to allow them to keep coming in-world and building up their next big STEAL.

However, like everything else that upsets people in SL - the Lindens will just hide behind their TOS and say "nothing to do with us" as they profit from the cash-outs when these bogus businesses cut & run.

If you would like to see LL take responsibility for the regulation of finance in SL then post a reply.

I am not a banker, but I would have thought for banks to operate as banks you need:

1. The ability to mortgage a parcel as a security.
2. Voluntary identification run by a reputable company.
3. Auditors.

If these scams get to be large enough, someone will sue and LL will be asked to provide RL details about whom they cashed the dollars out to. However, it might be hard to convince a judge that you gave a million US dollars to someone whose real name you did not know and who promised 100% interest pa and that you are sane.

I don't see LL ever getting involved in these disputes.

To regulate banks, you have to have banks to regulate. There are no banks in SL, only Ponzi schemes that call themselves banks. The police handle Ponzi schemes. Almost all the people who are involved in Ponzi schemes lose money. Only the early entrants who also exit early and the Ponzi confidence person gain money. In the United States, a Ponzi scheme in SL might constitute wire fraud. Consult a real lawyer or the FBI in the USA. [/INDENT]

Why on earth people give their money to these unregulated services run by complete strangers who have no one to answer to and can vanish anytime they please. I would never put my money in an unregulated bank in RL why would I do it in SL?

Because - in the US at least - you can't call yourself a Bank unless you are regulated; to do otherwise violates consumer fraud statues (among others). The confusion of the SL depositors is somewhat understandable in light of that.

Of course, LL will not regulate the existence of false banks, even though they did exactly that with casinos. Casinos are a legal liability to SL, fake banks aren't. Surprise: LL cares not at all about "banks".

My thoughts exactley..

Better sugestion than LL regulating the SL financial industry -

Just bite the bullet and BAN IT.

Most of these funds are likely illegal under California law anyway.

I'd rather see residents take responsibility for their finances and stop letting their greed make them put their money into these scams. The FBI has snooped around SL enough. Let them hunt Real World Criminals.

Yeah, that works - people taking responsibility for their own finances. The US sub-prime mortgage fiasco that has sent the financial world into tailspin is a shining example of how good people are at doing that so what hope is there inside a game?? Dangle a carrot and people will bite - unfortunately the extremely short memory of SL is the reason this will happen again and again. Some folks involved with The Bank had never even heard of Ginko! Next time around nobody will remember what happened with The Bank unless LL does something to raise awareness.

This whole discussion is pointless however - LL will never ban something that is making them money unless there is an inescapable legal reason for them to have to. I'm sure that the whole in-world sex industry exists in a grey area as far as US law is concerned but a ban on that would pretty much shut down SL for good. And what about copyright infringement on media streams? Just quoting a disclaimer of responsibility is not really good enough - the RIAA has shut plenty of torrent tracking sites who just claimed to be "impartial conduits".

Until some regulation is imposed, SL remains a perfect vehicle for money laundering! What amazes me is that it's lasted as long as it has...

Nope, that is why the FBI was at LL in the first place, because of money laundering. That spawned the LL Risk API for L$ brokers, added the 150% penalty to receiving (even unknowingly) fraudulently purchased L$, severe trading limits for legitimate players, and even automatic account lock-out for receiving too many L$ as donatations (e.g. for charitable endeavors).

Collette is likely right about SL "banks" violating California law, but whereas the laundering hurt credit card companies (who are keen on using the FBI to stop fraud against them), the "banks" just hurt LL customers who don't have the FBI or California AG's ear.

Well I suppose the U.S. victims could try to contact their state's attorney general or something. LL says that $L has no value even though we all know how flimsy that defense is being that they offer a place for players to turn it into RL money.

Individually though I think most amounts of lost money would only qualify for small claims court anyway not making any legal action really worth it IMO.

I just saw this thread ... as i have lost some money to 'The Bank' as well. What i do not understand is that if these have 'crashed' why do they still have offices all over the place. Can't LL or some one reposes the properties and itmes, sell them and pay back something to the poor witless depositers?

They could - in principle - repo the land, but they have no idea who the depositers are. In practice they don't have any reason to care at all, so they don't.

Also, so long as an account is in good standing (on LL terms) they can have whatever they want on their land, including fraudulent deposit boxes.

Ain't Second Life grand!

Chalk it up as the cost of playing the "game". I would be very surprised if anyone gets their money back from LL or from Jasper.

Oh I'm under no illusions about getting anything back - I've taken it on the chin and chalked it up to experience as you say. Having researched this some more part of me wants to actually believe that Jasper did not intentionally set out to defraud all his customers and this was nothing more than a badly managed but well-intentioned scheme that collapsed spectacularly around him. Unfortunately my faith in human nature is still a little too dented to accept that.

Whether the guy is laughing on a beach enjoying the success of a scam or hiding in shame from failure of a business venture we may never know for sure but as people keep reminding me, memories in SL are short and there will be another crop of willing investors just around the corner. All we can hope is that those who did get stung don't just give up and leave SL but stay around and help promote awareness of the dangers of in-world financial schemes.

I just don't get it. Someone help me out here. I'm not trying to be an a$$, I'm just wondering exactly how does anyone think giving your money to someone you don't know, have never met, and is in a "virtual" world makes sense? I'm not ripping on those of you that did. I'm merely curious as to why?! If you had an abundance of lindens, why not cash them out and either deposit the USD into your paypal account, bank account, have a check mailed to you, or have them in your SL balance? To me it sounds like a huge gamble just giving it to someone so that it "makes interest" I mean seriously... what kind of interest could you possibly hope to accomplish that makes it worthwhile to give them all your money?

I have deposited money in several SL banks. I have lost a lot of it. I have not lost quite a bit of it, too.

My reasons for "giving money to someone I do not know and have never met in a virtual world" are three-fold.

First, I have been personally robbed of all my lindens in my account by encountering a theft-script (which was a rewritten gambling script). While I reported this theft, including forwarded IM logs showing the thieves admitting to the theft, to the Lindens -- nothing happened. It appears that the Lindens did not even investigate. Therefore, there is no safe place for money -- even in your SL account -- and some banks are (at least in the short term) relatively safer than keeping the money as cash-on-hand.

Second, just as in real life, I find that putting the money in an account -- rather than having it as cash-on-hand -- is a form of enforced financial discipline. At least for me -- it curbs impulse spending if I have to go through the added step of going to my bank and withdrawing the money to buy that shiny, glittery, useless thing I just have to have.

Finally, and most importantly, I put money in the bank as a form of SL community-building. I think we are all better off if there are real and healthy institutions -- run by private avatars -- throughout SL. This includes legal institutions, residential communities, retail and wholesale business, investment institutions, and banks. Thus, I was and still am willing to put some of my lindens in a bank -- not because I am trusting the bank to act like a RL bank, but because I consider support for such institutions to be an investment in the whole of SL, the SL experience, and the community of SL avatars.

That said, I think that some regulation of SL businesses -- including banks, stockmarkets, and retail/wholesale/service businesses -- would be helpful. In RL we have such regulation through law. We have a developed set of contract principles, which are enforced in courts. We also have some institutions, such as RL banks, which are closely regulated by government. The SL economy would benefit from the kind of security RL law brings.

The real question isn't whether to regulate SL businesses -- but how to do so. Linden Labs has proven unwilling or unable to regulate SL businesses. Therefore, we SL avatars must do so ourselves. We have two choices. Either we can rely on RL laws by filing RL lawsuits in RL courts -- or we can develop SL institutions to regulate SL behavior and contracts. I personally favor developing ingame solutions -- but doing so is not easy with the limited tools the Lindens give us. Still, with work and imagination, it should be possible. There are several ingame groups already trying to work this out -- and I think we all should stop crying to the Lindens to do something (a useless exercise given the Lindens willful ignoring of all complaints that don't directly reduce LL profits) and start supporting these ingame, private efforts.

Beathan Vale

Can someone point me in the right direction why and how jasper comes into all this. Me and a good friend had a run in with this person a while ago and i had a funny feeling about him then. I didnt at the time think he would run off with peoples money, but i know he wouldnt shut up about his financial conquests.......

Not to pass judgement at this point but can someone tell me the story behind the cashing out?, i know he was pretty wealthy in rl or so he claimed so it comes across a little wierd he would take this course of action regardless of his self centered persona.

Probably the best summary is here:

http://sl-newspaper-bnc.blogspot.com/2007/09/weekly-business-review-23-sept-07.html

wow.......after reading those interesting topics i hit the nail on the head when i got the feeling he was no good.

I helped steer a friend away from putting her business under his umbrella. Something she had put alot of effort and love into. The promise of support and helping to increase the size of her business was pretty tempting from a self proclaimed wealthy individual.

After reading all this she is downright shocked and relieved she didnt place all her hard work and hard earned money anywhere near him.

I know it is small compensation for people that are losing their money in sl to these people but with each expensive loss comes a free hard lesson in that people generally do not perform miracles without the help of god........even less likely with your finances, the safest place for your money is in a jar under the bed

take care and be more careful next time

I've got into the habit of just never ever giving debit permission except to things I made myself, and cashing out my money when I get enough of it and putting it into my real-life bank-account instead.

Perhaps with identity verification around the corner we could have some form of business or "secure" identity verification offered as well, to establish trust that a business/individual can be held accountable if it does something like this.

ie - sure, don't require passports for regular verification if it's not needed. But require it for business verification so that a person can be held accountable by real-world authorities, and can verify themselves as a trustworthy business. Certainly this would be useful for any 'banking' systems, simple shops aren't as a big a deal since you aren't really investing in them.

Much in the same way you can become "PayPal verified" when you go to sell things on eBay.

My only worry now is the shortness of memory that exists in SL and the possibility that in a few months we'll be seeing another thread like this. ID verification is a step in the right direction for sure but it would be no real effort on the part of LL to post a front-page notice every now and again. If they don't want to take any responsibility for what happens in SL finance they should at least take responsibility for posting a reminder of the risks.

After all, they're repeatedly reminding us to secure our passwords in case our accounts are hacked and drained of cash & inventory or used for activities that might leave them open to legal action.

Yeah, I remember when I thought LL should pretend that it cared about their customers. I expect you'll get over it too, eventually.

I read all of this and the threads attached to it...and all I can say is WOW. ok well maybe that's not all that I can say. I am with the group wondering why you would give your money to a complete stranger in the first place....well i guess i know why...because you wanted to make some easy money with that high interest rate...but like granny says, everything that looks good to you ain't good for you.

Of course what he did was dishonest, immoral, wrong. Unfortunately there are people lole that in this world (VR and RL). I just wish people would use the same caution on here as they apply to their real lives...or is becoming financially foolish a part of the role play?

Asking Linden Lab to fix this for you is like asking a casino to refund you that 10K you just lost at the crap table...it aint gonna happen. And honestly it shouldn't...when you gamble you sometimes lose...don't go running to LL to take responsibility for YOUR mistake. Sounds harsh, but it is what it is.

For those of you wanting to invest in the stock market...the DOW is open monday-friday...and before you do play the market...remember ENRON.

Ok - who let the "Nah-Ha" kid in from the Simpsons?