Is Linden Lab FDIC Insured? Shouldn't it be?

After reading this thread:
/139/b7/104848/1.html

and the one it references:
/130/93/104687/1.html

I have to ask is Linden Labs FDIC insured? The reason is this. Residents pour US$ into SL each day. LL then uses those US$ for operating expenses, salaries, maintenance, etc. Then when things like this happen (Auction Exploit) and the threats to legally attack LL, I would have to imagine that some people rush right over to the Sell Lindens page and/or request a payout ASAP! (I would/did).

So if this were to happen all at once, and several hundred individuals requested a payout amounting to more cash than LL had on hand allotted for payouts, we wouldn't get paid.

Not only that, but if a court battle arose and LL had to pay legal fees, and for some reason wound up losing assets and/or funds as a result of this, then what would happen to the money that we have invested in LL?

Are they FDIC insured? It seems as they classify as a financial institution being that they trade and hold US$. Not much different from PayPal.

You hold money in your PayPal account and can use the account funds to pay eBay auctions and on other PayPal enabled websites. You put your money into SL and use it to buy items in world at various locations. The fact that LL has created its' own currency does not make it any different. It's still US$ in the end.

I enjoy this game as much as anyone, don't get me wrong. But before I go buying and island...or 100 islands...I would want to be sure that if something happens and my 180,000 USD is stuck in my account...that I would be able to get my dough out!

What are your views on this? Are they FDIC ensured? Should they be? Let's discuss.

If I remember correctly, PayPal is not FDIC insured...

http://www.auctionbytes.com/cab/abn/y02/m03/i13/s03


[Edit:] and just for those that would wonder why I mention PayPal, they're handling significantly more money then Linden Labs will ever handle. And in a much more "bankly" (is that a word?) manor.[/Edit]

Linden Lab is not a bank or a credit union and the Linden isn't a legal currency. It's play money and only has a value because other players are willing to pay a real world currency to buy it. LL wouldn't be eligible for FDIC insurance. They probably do hold some sort of insurance against lawsuits, most corporations do.

If Linden Lab ceased business, for whatever reason, the $L would have no value at all, because no one would be buying it. Land owners would also see that sims/land go poof. All content within SL, including land and $L only have value as long as other players are willing to buy them AND Linden Lab stays in business.

Correct Paypal is not FDIC insured if Paypal fails you are not covered by the FDIC.

Source

FDIC pass-through deposit insurance protects you only against the failure of the bank at which PayPal places your funds, and does NOT protect you against PayPal's insolvency. Through the terms of our User Agreement, we believe that your funds will also be protected from any claims of PayPal's creditors and will be returned to you even in the unlikely event of a PayPal insolvency.

ps.

FDIC insurance is designed to provide people a safer place to keep their money than a sock under their mattress not insulate them from business risks. As such LL should not be FDIC insured. Whether they should consider pass-through insurance for US account balances is another matter. But the FDIC absolutely should not cover $Ls or servers(land/islands) or any other content. That is a business risk.

What you are describing is a business; not a bank. Customers pay the business money for a service, and the business uses that money to meet expenses and expand or make a profit. That's in no way a banking institution.



Hope you didn't take a bath on your L$; those legal threats against LL are laughable. No court is going to issue an injunction that would shut down LL for the reasons stated in that post. The very fact that the poster made such a threat is evidence that he has a very poor understanding of the law.



LL is not a bank. It would be foolish to keep more than a month or two worth of tier in a US$ balance in your account with LL. The only money that it makes economic sense to keep there is money that you are going to use to pay LL.

However, for all practical purposes, LL is going to be able to pay you--unless they were to go bankrupt. Then the same thing that would happen that would when any business that has money on account becomes insolvent. You would become an unsecured creditor.

LL might go bankrupt someday. It is, after all, a VC-funded internet company. That's a risk. However, if it ever does go under, it won't be because of the frivolous lawsuit threatened in the links you listed.



PayPal is not a bank and is not FDIC insured, either. From the PayPal ToS:





It makes a difference because you have agreed that it does when you accepted the Second Life Terms of Service. From the SL ToS:





Trust me; no one with 180,000US$ is going to leave it sitting in an only semi-liquid, non-interest bearing, uninsured LL account.

There is no reason LL would not have the cash on hand to pay Lindex balances.
That money is not theirs, I imagine it is held in it's own account. Your Lindex USD balance is held for you as a convenience to you.

*If* I ever found out otherwise, I would never allow my balance to get above $1 USD for more than an hour.

I remember the big run on the Linden banks back in the thirties. Sadly the country plunged into the great Linden depression right after. Thank god the federal government created the FDIC to insure banks just in case another online game ran into some problems. It's good to know the widows and orphans will be safe, their hard earned lindens from camping chairs and Best Thong Contests insured by the taxpayers and federal government.

Look - if you really have a large proportion of your life's savings sitting in Lindens, you need to ask yourself if that's really so smart. You also need to ask questions about how even the most basic financial education would be beneficial and the ways in which virtual worlds really aren't better than real worlds (and real banks and real cash and liquid investments and geez do I really need to spell this out?)