The King is Dead

ginko never said they have no assets.

they have no _liquid_ assets to pay out depositors.

apart from that they're issuing the bonds so they dont have to purchase anything.

translated: we securitized our debt to you and now we'll be picking up our bonds on the cheap.

Once again, we see that the Second Life economy thrives on the uneducated consumer.

A lot of Second Life residents are screwed out of a lot of money because they got caught in the confusion of whether Lindens are real money or play money. When you want to invest, it's real money. When you want to collect, it's play money.

If you lost money to Ginko, sure you can sue. You can pay a lot of lawyers a ton of money to win your case. And at the end of the day, if the corporate owners are hiding in Brazil and pissed away most of the money already, your court judgement has as much value as the Ginko bonds you are being offered.

(In fact, I can see this going the way of many such class-action suits: The class strikes a deal with the defendant in which the lawyers receive a million USD cash for their work, while each member of the class receives some amount of Ginko bonds for $10L or something.)

Whether or not he intended to rip off anyone really doesn't matter. This is why banks are regulated. It takes more than good intentions to properly mangage others' money as their fiduciary.

they're issuing the bonds that they are going to be purchasing back. but with wut money?

Well, it wiped out what I referred to as my "college fund." Then again, I always knew there was a risk.

Mari

ha ha ha i ask you again: do you think he still wants to be a banker in RL?

I thought WSE was banned as a gambling game..

my guess is they can get a loan. no problem.

its only gambling if you can't afford to lose.

otherwise it's called speculating or investing.

Assets such as Nicholas' car, apartment, holiday home, helicopter, speedboat, Rolex watches and diamond encrusted pimp cane?

Broccoli

Well Actually

He paid himself and his freinds over 100K

He paid to set up his personal website as one of the "RW Investments" (no dollar figure)


That could easily be a HUGE chunk of the "pre-interest" dollar amount he recived.

I really think he took most of the money for himself and hoped SL investments would grow to cover him robbing the till.

After all if Ginko had continued to baloon .. the couple hundred K dent he made would go un-noticed...

wow - nick has a diamond encrusted pimp cane?.

but yeah, I'd call those illiquid.

foot note: can I get one of those at slexchange?

The unrealistic salaries in themselves are not quite "robbing the till," but it should have been a Big Red Flag: even the most shamelessly avaricious hedge fund manager would never take such an enormous percentage of the total assets under management and call it "salary." But to me, the interpretation is still ambiguous: thief, or just totally clueless about how the financial services industry works--even to the point of fantastical notions of self-remuneration?

Bonds? Waint one sec...... (LAMO!!!!!!!) Ok Im back. GIVE ME A FREAKING BREAK! HOW MANY TIMES DO I HAVE TO SAY THIS GUY IS NOT A REAL BANK! He is some dude behind his computer just like the rest of us hoping to make a buck or should I say L!

AGAIN... HE IS NOT A BANK! Now he is talking about bonds and shit, this guy is wayyyyyyyyyyyy to much. Point is he will never recover so stop trying to fool yourself. All he is doing is attempting to buy time while hes selling off assests left and right so he can get the hell out of dodge.

DO YOUSELF A FAVOR.... GET A LAWYER. Point blank. Do not buy into this so called bond shit now. Bonds, lmao. This guy just never learns....

Remember the old saying....
"Fool me once shame on you, fool me twice shame on me"

Don't be a fool, talk to a lawyer if you have alot of money tied into this guy.

I dunno

the AFTER Interest dollar ammount was 750,000 USD

Remember he was promissing insane interest rates of over 60% per year.

so the Actual dollar amounts recieved were quite a bit less than 750,000 USD

If for example they were only 500,000 USD ..

then 100,000+ US would have been over 1/5 the the ENTIRE depositied amount.

And who knows how much he spent on his personal website.

Id call that robbing the Till.

I will tell you what if people now fall for this bond crap, I am gonna open a bank next! lmao

actually it's way to early to say ginko won't recover. there's 250,000 bonds on the market at or under 0.27 as we speak. that's 70% off nominal value. not to mention the 1 million that changed hands in the last 24 hours at an average of 0.16.

/me waiting for Voodoo Bamboo Bank to open.

need a scripter?

It's the only hope some people have to see their money again. No one is falling for it. They just have no choice.

The lawyer route is an even bigger long shot.

If everyone would look at the bigger picture, this goes well beyond Ginko loosing and the people who had savings there.

When SL started decided to get rid of the Casinos, that started the ball rolling IMO
Now that caused loss of jobs including all them campers. If they also decided to sell their land, SL could of taken a hard hit in it's finances too.

I'm surprised we haven't heard from these other Banks about the withdraws there.

I have already seen a couple of Companies go under on WSE

People who held money in Ginko stated they lost everything because they kept their tier fees there.

I own a Retail Mall. I have seen sales drop, which in turn means stores aren't going to rent anymore.

So all the way around everyone is effected. SL will still get their tier fees and monthly fees, but I wish they would take a look how all this started and if they can do anything to relive the pressure. They may very well loose alot of people and get bad press over this.

What were the fees before the Casinos were here, the land prices have already fallen and keep doing so.

Someone has to have the answer, this was just a game, but not now for some

this is just my opinion and I hope no one takes offense to it

Well, with "hedge fund manager" math, it would go something like this: total fees of 2+20 is kinda standard: 2% of assets under management, plus 20% of the amount the fund appreciated in excess of the benchmarks for the sectors in which the fund is invested. So, 2% of US$500K would be US$10K. Pretending (as they did) that they were generating 60%, and pretending for the nonce that the benchmark is 0%, 20% of 60% of US$500K would be US$60K. So, total fees to all Ginko officers, employees, overhead of running the business--*all* fees--should have totaled US$70K (with very generous assumptions and accepting all the pretending that was going on).

Even if we pretended they were a "Fund of Funds" where 3+30 is common (and which in no way describes the risk-management practices of Ginko's!), the total would still be only US$105K, again with the most generous of assumptions and wishful thinking.

Actually, I talked myself into it: Thief.

Well, yeah, he tried to "do right" by everybody the same way the Keystone Kops try to "do right" by catching crooks. Gross incompetence in the process of "doing right" doesn't excuse the gross incompetence part.

I *might* feel as you do, but there are several glaring mistakes which border on what would otherwise be *criminal fraud* in RL:

1) A rate of return was promised with no real plan to make the kind of return needed to cover it from the bank's investments. A 50-60% per annum return on investment is simply not realistic or sustainable; at least in SL, let alone RL.
2) Given (1), the greater portion of any interest payments made to people who then withdrew money from the bank came from other deposits, not from the investments the bank itself made.
3) Nick paid himself (and others) a sizeable sum of money that was cashed out to US$ as "salaries". Given (1) and (2) above, this money also did not come from the returns on any investments made, but from depositor funds.
4) Over time, the "negative spread" between the interest rate he promised to pay, and the actual interest rate from bank investments caused severe inflation of the actualized debt owed to depositors. Each day this occurred, every depositors' money lost value. All combined, it meant that there was becoming far more interest owed as a balance than actual deposits could cover.
5) Given (4), he still allowed people to withdraw their deposits plus all accrued interest, which meant that the money had to come from somewhere. Since it wasn't coming from the underperforming investments, it came from other depositors. Basically, the sooner you pulled your money, the more chance you had to "get it all".
6) The response to all this basically boils down to as close to a bankrupt organization that can be without actually going bankrupt. In RL, a bank which does what Ginko did would be shut down and liquidated to pay off. Why? Because screwing up with people's money this grossly doesn't deserve a "second chance". Why would anyone expect that, all of a sudden, someone who couldn't manage their money before will manage it better now and into the future? There's an old axiom which comes into play here: "Don't throw good money after bad". In addition, banks thrive only on public faith; when that is lost, there is little to no hope of recovery. The Scarlet Letter of Insolvency never, ever goes away.
7) The reason this entire house of cards had not fallen sooner was because SL was in a strong growth phase. With more and more people coming into SL every day, there were more and more people willing to put their money into Ginko for the (obviously highly) attractive returns. As such, there seemed like an endless supply of cash for anyone to be able to pull out some or all their money. However, as SL has begun to plateau, and now, a big policy change, causing people to pull their money out in droves, it was inevitable that a run would bring down the entire flawed system.
When you have a financial system which promises a high rate of return; you do not have adequate investment returns to cover it, your expenses, and to make a profit; and you are paying the promised returns with other people's principal, that is called a PONZI SCHEME. It is a well-known form of fraud, and it is illegal in many countries, including the US.

Basically, what the real problem boils down to is this:

IF Ginko was a bank, it would have gone to great lengths to make sure its investment portfolio would not only generate enough return to cover its promises to its customers, but also make enough extra to pay expenses (including salaries), but also to make a profit, so that it would show as a profitable business.

Since this was not the case, the system SHOULD NOT have been billed as a "bank". It was simply a high-risk investment fund. Well, yeah, Ginko had said that there was risk, but the system Ginko used, and the specific words it used to advertise and draw in customers indicated that it was a "bank". This confusion is where part of the fraud comes in. Maybe they meant for it to happen, maybe not, but it's too late for that now; the damage is done.

Given the way it was (mis)managed, what should have been done was bill it what it really was: a high-risk investment fund. Ginko should have neatly isolated everyone's accounts, and only paid interest when whatever investments it made with people's money matured. If the investment lost money, then that loss would be applied across all accounts which participated in the fund (either every account, or only ones which were drawn from to fund the specific investment). That way, if there was a profit, Ginko would take its cut and pass along the rest as dividends to the participating accounts. If there was a loss instead, it would pass that loss on to the same accounts. In this system, there is no fixed interest rate offered; you get what Ginko's investments with your money actually returned; nothing more, nothing less.



Actually, I am a RL professional programmer, so, doubt or not, that doesn't apply to me.

I think it is no more sad to see him demonized and drug through the mud than, say, Charles Ponzi was, when his scheme finally was revealed for what it was. Ponzi didn't run away with everyone's money, either. It made him no less a charlatan and a fraud, nor did it make him any less a criminal.



Don't forget that Nick has NO real downside to what has happened; he can't be forced to shutdown or liquidate. He has no requirement to do anything. Everything he does is of his own accord and enlightened self-interest. He's making his living off of Ginko now, and if he can find a way to keep it going so that there is enough liquid cash that he can still draw something as a salary, I am sure he will. Maybe he doesn't relish being known as a "bad guy", and feels compelled to "do something" to try and shore up his image for some future deal; I don't know, really. Either way, it doesn't change the fact that he has screwed up royally (heh), and there is actually nothing that can resolve it for all those bank depositors...err, I mean "investors" who got screwed. Throwing a pittance back at them isn't going to solve anything.

In the end, Ginko has lost the public faith; something which is necessary for its continued survival, more than the money itself. If Nick thinks he can regain that, I think he is deluding himself. It would literally take a miracle (or maybe winning the Brazilian lottery) to even begin to put a dent into the tarnish on his image and credibility at this point.

I entreat everyone to take a little time today, and read these two articles fully; then appreciate just how much similarity what is happening with Ginko mirrors what happened with the Securities Exchange Company:

http://en.wikipedia.org/wiki/Ponzi
http://en.wikipedia.org/wiki/Ponzi_scheme