The WSE Hacked & Gambling Ban

the only good virtual bank is ur own wallet and the dollar account in my_account to pay tier with

That's funny, that "black hole" made me US$60.00!

It was a good setup, but everyone that got into it should have known there would be risks like I did. That's why I didn't put more than about L5000 into it...and none of that came from my RL bank so it's all good to me.

That thing has lost steam, though. I'm going to be selling everything and withdrawing my money from WSE once it's up...if my money's still there!

Luke's a good guy and means well, but he came in as a relative n00b with a huge vision...which can be a great success or a great failure.

I won't write it off as a failure just yet...I just want to buy some land with that money!

No, there is no need to do that. It isn't a regulated game so you could just shutdown and keep the money if you wanted.

The problems with this are:

1. The WSE wasn't a "black hole." People put money in, but other people took that money and used it to grow their businesses. Surely people such as Sarah Nerd or Rockwell Ginsberg would have spoken up if they did not get the money raised by their IPO's.

2. The WSE itself is owned by one of the companies traded there, and that company (HCL) is absorbing the loss. Remember, "the WSE scandal" refers to the WSE being defrauded, not to it defrauding anybody; I have heard of not a single person being unable to withdraw funds from their account. (Unfortunately, HCL's stockholders may take a hit in the form of lower share prices.)

3. LL has been able to recover an (unspecified) portion of the monies taken, and is still working on recovering what else they can; HCL's loss is less than the amount reported as originally taken.

Some people shout, "Ponzi!" at every online financial operation, then gloat whenever any fail. Where are they when government-regulated banks and hedge funds fail in real life? One of the reasons people have been able to earn so much money in SL up to this point is precisely the lack of "regulation." RL businesses can easily end up paying 50% of their revenues to the regulators in the form of taxes, licenses, compliance costs, etc.

In RL, the bottom-feeding investors invest in government-regulated (and often insured) banks and funds; the venture capitalists and bigwigs invest in unregulated (and certainly often riskier) instruments.

Personally, I've been an investor in the WSE (and profitably so); a few weeks ago I cashed out, as a reaction to the broader SL economy rather than to any fears regarding the WSE itself. One of the stocks I held was HCL. I also buy stuff online from strangers, through eBay and other such sites. I give people online I don't know my credit card number from time to time. What has it all got me? So far, a bunch of cool stuff. Even in buying and selling higher-risk virtual goods, I've never been burned.

Do I examine the risks? You bet. For the higher-risk transactions, I've limited who I would do business with (e.g. how much positive feedback over how long a time). I've passed on lower-priced goods from sellers that didn't satisfy my comfort level. I have no problem with others doing business as dictated by their own standards.

I just find it odd how often "ponzi" and "scheme" and "con" are thrown around in regards to SL operations such as the WSE or Ginko (where I've never been tempted to invest) with absolutely no evidence that anyone has been defrauded.

I'll tell you what worries me about the SL economy much more than some programmer running off with a bunch of HCL's money: LL's abrupt policy changes. Free unlimited accounts...then identity-verified only and no alts (when the economy depends on numbers of residents). Land shortages followed by land dumps (when such a large part of the economy is land sales). Selling mass quantities of L$ for 1 L$/US$ less than residents are offering theirs (when a higher L$ value would mean higher income for SL businesses). Going open source suddenly (when so much of the economy was driven by script writers). Banning gambling abruptly. Etc. etc. etc. I actually agreed with some of these decisions, but have to acknowledge that they had huge impacts on the SL economy...much more than any single incidence of resident-to-resident fraud does.

The more LL regulates the economy, the higher the costs of doing business in SL becomes. Sure, an unregulated stock exchange (there are half a dozen so far) is risky--but at least residents can choose whether or not to participate, and in which. One one hand, investors will reward the exchange with the most companies or the most transparency; on the other hand, companies will reward the exchange with the most investors or the lowest regulation; in the end, the market will reach an equilibrium with the level of transparency and risk and regulation most acceptable to the majority--something I doubt LL will come up with on its own.

Chex, Thank you for that informative post. I agree with everything you wrote (especially the part about LL's policy changes) and appreciate you taking the time to write it.

Amen to that.

In the end the real world will raise its ugly head and stamp out these little play banks and stock exchanges, probably over night.

FYI, the WSE is open and trading. Their press release:
https://www.wselive.com/news/show/17

Some of what you say may be true, and thanks for the post. It does put things into perspective. Especially your comments about Linden Labs. Thanks for your time spent posting this

My own take on this is that I believe people would have no problems loosing a few hundred pounds (or US dollars) on a speculative investment. After all if they can afford to connect to SL in the first place (taking into account hardware and broadband costs, and in some cases premium membership) the loss of a modest amount of money will not change their financial life.

Indeed I personally have speculated on London AIM penny shares, as well as contracts for difference, and the odd currency trade. All with tight stop losses of course, and I have both gained and lost. The risk imho is broadly similar. In addition I have played around with Ginko and the WSE.

Providing the potential loss is modest and will not cause you sleepless nights, go ahead and punt, that’s my view.

However....from various sources (most of which I trust) (and I have been around in SL for around 2 years) I hear tales of much more substantial sums being speculated on SL "financial services", by that I mean 5 figure sums in pound sterling or US dollars. That triggers professional interest, indeed if I could match Ginko's investment return of around 45% per annum compound achieved over the last few years, in real life for both myself and clients I would be a contented bunny........in theory it is consistently better than almost anything in first life I am aware of.

Finally I note currently Ginko withdrawals are limited to $L5, 000 per day per account (around $20 US) down from the much more generous $L300, 000 per day or $1,200 US

I have a hard time feeling bad for anyone who is foolish enough to put their money into this crap!

I guess to some it makes sense to put their imaginary money into a pretend bank. But in a world where there's no protection at all for me if I give someone 1 L$ today with the promise that they'll give me back 2 L$ tomorrow, and tomorrow comes and they're nowhere to be found with my money... I can't see why I'd want to.

Since you replied to my post - I think you misunderstood me.

Im far from gloating. I dont think anyone should lose their money to these things.

I just think that if someone DID have a ponzi scheme going,

The BEST way to get some money out of it without having the investors coming to get you, would be to tell people you were robbed.

As in - I own a big, unregulated, uninsured, "investment" scheme. I have 100$K in it. I want to buy a 20$K car.

OMG Folks someone stole 25K$ from our fund. Were so sorry ..

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Yes I think WSE is either an intentional Ponzi scheme - or - an honest attempt that simply runs in a Ponzi manner.

Ginko is either an intentional Ponzi scheme -or- (due to its duration likely) an honest atempt that simply runs in a Ponzi manner.

Either that or LL will.

My guess is they will decide its not worth allowing these banks when it means upset customers - and them using valuable employee time trying to recover some of the money.