How secure is your 'virtual bank'?

Just spotted this on arstechnica,

http://arstechnica.com/news.ars/post/20060828-7605.html


The gist of it is that eve's biggest 'virtual' bank (invest with them and they pay interest every so often) just suffered a massive ponzi collapse and its estimated that its owner just walked with what appears to be $170,000 US worth of other people's money.

Muahahahahahahahahahaha..... FSLIC I like that... Time to open up SL Insurance Company who insures risk in the SL economy.

Interesting that Cally (the perp in this case) is still out and about, and hasn't been banned from the game. It appears that massive fraud and theft, is all in a days work around there...

An experiment in anarchy, I guess. Hopefully they don't shut it down, I wouldn't mind seeing how it all turns out.

Also very interesting considering the debates on the subject around here was the quote :

Unfortunately,.....it is unlikely that the FTC will be signing up and logging in with a team of virtual investigators any time soon. For one thing, and I think this needs to be made absolutely clear so that there is no confusion: NO ACTUAL MONEY WAS STOLEN.

L$ has no value remember.

If I understand correctly, Eve Online is *intentionally* a somewhat lawless environment, where piracy and such is the raison d'etre of the game. It's perfectly acceptable to destroy someone else's spaceship and take all their things.

As such, people there actually *pay* to coexist in an anarchic environment.

So it appears that this fellow simply played the game by the rules.

Disgusting, isn't it? Note how the perpetrator signed off with 'F you' at the end of his rambling, snarky video (yes, I skipped to the end, it was getting boring). No matter how much money he made, he has to live with knowing what kind of person he is - almost, but not quite, fitting punishment.


The difference is, Second Life is *not* Eve Online. EULA's notwithstanding, the court systems and the IRS consider items of value as having value regardless of how people say 'oh, there isn't any value here'.

Just because someone somewhat officious at a game company says that certain items are worthless doesn't make it true. That's known as tax evasion, generally, and it *will* catch up to virtual worlds sooner than later.

In which case, Ponzi scheme perpetrators will be facing some long prison sentences. I wonder who will be the first to find out the hard way.

my question would be to what degree his own terms of service or advertising can be held liable to him. Regardless of actual theft of property laws he could probably be the subject of a large breach of contract case.

I can't say I don't feel a little bit sorry for the people who lost their money but at the same time as long as it wasn't a TOS violation you have to give this person credit for beating the system and making a little bit off of it in the process. In that game if I understand it right their currency has no real world value so I doubt it technically counts as fraud or theft in the convential legal terms but in SL despite LL's claims to the contrary about the L$ I bet that it would be either actionable in RL or LL would be forced to take action lest the populous take action on their own (can anyone say mafia contracts).

No Money was stolen, but property/data was stolen. Justice now depends on what country you are in.. China leads the way.




Online gamer in China wins virtual theft suit

BEIJING, China (Reuters) --A Chinese court has ordered an online video game company to return hard-won virtual property, including a make-believe stockpile of bio-chemical weapons, to a player whose game account was looted by a hacker.

Li Hongchen, 24, had spent two years, and 10,000 yuan ($1,210) on pay-as-you-go cards to play, amassing weapons and victories in the popular online computer game Hongyue, or Red Moon, before his "weapons" were stolen in February, the Xinhua news agency said on Friday.

Li asked the company, Beijing Arctic Ice Technology Development Co Ltd, to identify the player who stole his virtual property, but it declined, saying it could not give out a player's private details, it said.

Police also gave Li no satisfaction, so he took his case to court, demanding 10,000 yuan in compensation, Xinhua said.

"I exchanged the equipment with my labor, time, wisdom and money, and of course they are my belongings," it quoted him as saying of the virtual property he collected online.

The company argued that the value of the virtual property only existed in the game and was "just piles of data to our operating companies."

In the end, Beijing's Chaoyang District People's Court ruled on Thursday that the firm should restore the player's lost items, finding the company liable because of loopholes in the server programs that made it easy for hackers to break in.

China's online gaming industry has boomed in recent years. Analysts say it is conservatively forecast to be worth about two billion yuan this year, and is growing more than 100 percent a year.

Disputes over virtual properties have also soared, Xinhua said.

RBD can't you read?

The chinese court ruled against the company because there were loopholes in the server program, which allowed someone to steal the virtual sword.

(btw Linden Labs would rule as well as CCP Games if Nicholas Portocarrero would run away with all of Ginko's money).

I am in agreement with Desmond Shang on this one.

I believe the core legal view is that regardless of Linden stating the currency has no value a Court may decide otherwise because in effect the Linden Dollar has "fungible value"

In the UK contract law has three main conditions, payment, consideration, and contract, all three of which would appear to be satisfied with the two main Second Life Banks, Ginko and SL Bank.

Converting back into real dollars I would estimate from information in the public domain Ginko and SL Bank account for around $250,000 or say $L70,000,000. That is a sum equal to nearly 10% of Second Life's total currency in circulation (although I accept different definitions of currency exist (M1, M2, M3 etc))

Given these facts I pondered long and hard. I can quite see how it is possible for a SL Bank to make Linden dollar profit on an ever-weaker Linden; the challenge was to figure out the converse with everyone keeping very opaque about it. I believe I am part way there.

I am a modest investor in both the main SL Banks and will currently remain so. A genuine loss is one thing, fraud is another. This post is not intended as any type of endorsement, do your own research as they say

I should not really do this because this information comes from my First Life day job but under the circumstances (and for information and any debate)

------------------------------------------------------------


From this week's Mauldin, by Hunt Taylor


"Let us start with what we know. First, these markets look nothing like anything I've ever encountered before. Their stunning complexity, the staggering number of tradable instruments and their interconnectedness, the light-speed at which information moves, the degree to which the movement of one instrument triggers nonlinear reactions along chains of related derivatives, and the requisite level of mathematics necessary to price them speak to the reality that we are now sailing in uncharted waters.

"Next, we know things have been getting less, not more, turbulent, and that the tendency towards market serenity (complacency?) has been increasing. This is counterintuitive. It's not as though the 21st century has been lacking in liquidity shocking events. Since the bursting of the tech bubble, we've had a disputed Presidential election, 9/11, the collapse of Enron and Worldcom, the invasion of Afghanistan, the war in Iraq, US$70 oil, the largest debt downgrade in history and the failure of Refco, to name just a few. There seems to be an inverse correlation between market complexity and market stability, for now anyway....

"I've had 30-plus years of learning experiences in markets, all of which tell me that technology and telecommunications will not do away with human greed and ignorance. I think we will drive the car faster and faster until something bad happens. And I think it will come, like a comet, from that part of the night sky where we least expect it. This is something old.

"But I have learned to trust my eyes and ears and overrule my heart, when I have to. Everywhere I look, technology is making things faster, more efficient, safer. I cannot find the law of physics or economics that says it cannot happen in financial markets as well. I think, because risk will be lower, return will be as well. And savvy investors may have to seek additional risk, and manage it well, in order to earn an excess return. This is something new.

"I think shocks will come, but they will be shallower, shorter. They will be harder to predict, because we are not really managing risk anymore. We are managing uncertainty - too many new variables, plus leverage on a scale we have never encountered (something borrowed). And, when the inevitable occurs, the buying opportunities that result will be won by the technologically enabled swift."

And

And these stats on the housing market:

32.6% of new mortgages and home-equity loans in 2005 were interest only, up from 0.6% in 2000;

43% of first-time home buyers in 2005 put no money down;

15.2% of 2005 buyers owe at least 10% more than their home is worth (negative equity);

10% of all home owners with mortgages have no equity in their homes (zero equity);

$2.7 trillion dollars in loans will adjust to higher rates in 2006 and 2007.


Mauldin (as I understand him) doesn't entirely agree with Hunt's conclusion:

And yet, back to our opening theme, even as investors can hedge the potential collapse of the sub-prime mortgage markets and the slowing of the housing markets, it is more difficult to hedge the risks of a serious slowdown in consumer spending that would result. You just try and see what the results will be and avoid the oncoming train.

back when Ginko was starting, LL had clearly said that if you give your money to them, and for some reason they just run away with your money that they will not do anything. that its your own responsability.

And i imagine its the same here.

(tried to find the original post of this, but cant seem to find it)

Now, LL wont do anything, but will a RL court? Definite possibility.

You'll need a reinsurance company, incorporated in the tax haven Isle of Snark. Will write cover up to L$100 million excess of L$100, for a premium of L$10,000 per month. Call it SnarkRe.

Investors interested in this can't-lose reinsurer contact undersigned. Bring money and naivite.

~ Frank ~

Well, if he's not a dumbass, he will pay IRS tax on it. Then he will be scott free.

Ginko anybody?

I LOVED the video.

God, you have to love it when people make big bucks off general stupidity.

That could be used by anyone doing the same thing:

10:48 "Cally is Dead"
11:58 "Loot Count"
12:59 "Unveiling of the Alts"
13:30 "No Remorse"
14:02 "The Bottom Line"
14:38 "Be Back in 6 Months"
16:26 "F-You Everyone"

Scammer: "I ran a virtual bank on a video game and 'cashed out', here's my income tax..."

US IRS: "O RLY?"

Any hint of unlawful dealings whatsoever, as determined by the IRS, and they can seize everything while subjecting you to severe criminal charges.



Governments have been dealing with scammers, racketeers and whatnot for centuries, and no matter how modern a 'spin' might be put on things (virtual banks, video game currency) - rest assured, NONE of these scams will wash in a courtroom, or go over well with the tax people.

"Innocent before proven guilty" sounds great, but does not apply to tax law (burden of proof is on you) and often doesn't really fly elsewhere. For instance, people are jailed for prostitution, even though there's no proof you didn't fall madly in love with that girl on the streetcorner, then give her some money just to help out. Nope, just doesn't fly

Tax problems like these are why organised crime goes to such great lengths to have 'legitimate' businesses for laundering money - just *one* tipoff to the IRS from any of the scammed in Eve Online or SL, and it will be *quite* interesting to see what happens.

I couldn't agree with you more...