Around the Grid

Prim Baby Returned to Inventory

An abandoned infant left on the lot of the Black Box Night Club was returned to its owner's inventory automatically. There it will stay in the Lost & Found until it is found next week, when it will briefly be displayed at a pool party for general merriment, before being lost again.


Supreme Court Overturns Furry Marriage

In a split 5 to 4 decision, the Supreme Court overturned the marriage of Bunnypet Hugsalot and Fuzzy Lumpkin, ruling that a Second Life handfasting union between a woman and an anthropormphic draco-kitsune was not legally binding in the eyes of the law.


Ginko Financial Now Less Worthless Than CitiGroup

The value of Ginko Financial, a collapsed Second Life pyramid scheme that vanished after taking $750,000 worth of investors money, is now less worthless than CitiGroup, a global financial services conglomerate whose $5.4 billion market value has been exceeded by the more than a hundred billion dollars of government bailout money it has received, let alone the incalculable trillions of dollars of off balance sheet derivatives this den of thieves and gangsters has yet to dump on taxpayers.


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Credit Crisis Not Impacting Virtual Stock Markets

In spite of an ongoing Wall Street credit crisis that has shaken equity values worldwide, virtual stock markets in Second Life have been completely unaffected, according to a new report issued Wednesday.

"People in Second Life are still putting real money into fake stock markets and losing it all," said Jonfromtexas Holiday, the author of the report. "Nothing has changed."

In the actual world, the collapse of the mortgage-backed securities market and hedge funds leveraging interest rate spreads, or 'alpha', has forced Federal Reserve Chairman Ben Bernanke into dramatic rate cuts and emergency measures not seen in generations. That has included a multi-billion dollar bailout of brokerage house Bear Stearns with taxpayer-guaranteed U.S. Treasury notes and a reduction of the core Fed Funds rate to 2%.

This news has had "zero impact" on virtual stock markets, according to Holiday's report. "Monetary easing has not influenced fake stock prices at all. Fake stocks are still difficult to trade, the fake exchanges are closed down after a couple months, and the principals quickly vanish, blaming hackers, software upgrades, or untimely accidents every time they disappear from the world.

"Speculators in these virtual stocks are promised unrealistically high rates of return by dubious companies with no articles of incorporation, no board of directors, no regulators, no listing standards, and rampant conflicts of interest," the report states.

"This kind of high yield investment scam can be used to steal from financially unsophisticated people, no matter what is happening in the real world."

Central bankers across the globe have taken on more than two hundred billion of dollars worth of mortgage backed securities onto their books as collateral for new loans to major financial institutions in an increasingly desperate attempt to offset the deflationary impact of housing declines and a sharp reduction in consumer spending.

That is the equivalent of more than fifty trillion (50,000,000,000,000) Lindens being injected into global financial markets, but this vast amount of money has had absolutely no influence on the actual value of virtual companies and fake stock markets whatsoever.

"In contrast, avatars have entrusted 50,000 Lindens to Ronin Piggington and his 'Metaversal Dreams Corporation," Holiday said. "That's about $200 US. Unfortunately, Ronin has vanished from Second Life after being eaten by lions, according to the last message posted on his Metaversal Dreams website by his 'brother.'

"Those avatars who 'invested' with him are not going to get their money no matter how much the Federal Reserve or the European Central Bank eases monetary policy in the face of the current crisis," Holiday said.


"Your Money, Your World, with Kanomi Pikajuna" is a weekly look at financial matters affecting your bottom line.

Stock Market Madness

Massively, along with Reuters, has a good Second Life news desk. Friday they put up an article asking, "Will the World Stock Exchange ever come back to Second Life?"

I've already talked about so-called Second Life "banks" being little more than fronts for pyramid schemes. It looked to me that after "banks" were banned, the Ponzi schemes moved into fake stock markets. This WSE story seems to confirm that. They closed up in early January to "upgrade their software," promised to be back in 4-6 weeks, and nobody's seen them since!

You cannot have a stock market when the operators of the exchange are also the owners of the companies, the market makers, and the regulators! You cannot have a stock market where there is no liquidity, no transparency, and no accountability. You cannot have a stock market if nobody can go in and short these pathetically undercapitalized, nanocap purveyors of nonsense down to the ground. That's what makes a market.

These are not stock markets and it's not "just a game" when the money is very real - otherwise, poker would still be legal in world. That's why I say money scammers are the real sociopaths of the virtual world, no matter what Wired says about silly griefers.

So if anyone out there has taken thousands of dollars off of gullible residents while making ludicrous promises of dividend returns, and then deposited that money in their real world bank accounts, then quite possibly they have committed a crime, and it will be up to a court to decide if it's "just a game", or high yield investment fraud.

Like it or not, somebody is going to have start policing this stuff or "metanomics" will never get off the ground.

Money Scammers, the Real Sociopaths of the Virtual World

A while ago I had a friend who worked at one of those virtual banks recently banned by Linden Labs. I don't remember which one, but I do remember he wanted me to invest, telling me about the amazing interest rates they were offering, something like 20% a month.

I laughed at him. That is almost an 800% return on your money in a year! He insisted it was legitimate. I asked how anyone could pay out that kind of return. He said the money came from mysterious "investments" in land and casinos. (This was back when you could still play poker in Second Life, or should I say, you could sit a table and be fleeced by rings of messaging, card-counting cheats!)

The stock market might return 8% a year, bonds and so on under 5%. But 800% a year in guaranteed interest income? Ludicrous. Only pyramid schemes can pay such high rates of interest, because they take the payments directly out of your deposit! That is not banking, that is fraud.

Given these absurd returns, how can a bank in Second Life be anything but a fake? How did they make any money? To answer this question, we have to understand how a real bank makes money.

A real bank profits on the interest it makes on loans. The more loans it makes, the more interest it collecdts. The only limitation to how much they can loan out is based on a multiple of the deposits it holds. This is fractional reserve lending, a unique power of banks. The money a bank loans out is created at the moment the loan is made, and retired when the debt is paid.

A bank in Second Life can not do this! It cannot conjure debt money out of thin air! It is therefore not a real bank. It can only lend out the money it has. It has no way to leverage interest income on deposits. So is it no surprise these so-called "banks" never did any significant lending at all.

Linden's public comments about the banks are so naïve, it's shocking. How many tiny little businesses did Ginko help get off the ground with "micro-loans" to brand new avatars? Ha! An unregulated virtual world where real money changes hands is a scammer's paradise. I wouldn't be surprised if the "hackers" that hit some of these banks were insiders. It is a common excuse insiders use to cash out and close up shop when running an online high yield investment scams. It certainly looks like these types of scammers set up shop in Second Life.

A law student made a convincing case that Ginko was just such a Ponzi scheme, and Ginko was perhaps the oldest, largest "bank" in the game. Tens, maybe hundreds of thousands of dollars have disappeared in these "bank failures." Disrupting Gorean sims with flying penises are the immature antics of drunken frat boys in comparison. Wired missed the real story, which is this:

Money-scamming con artists in Second Life are the most dangerous criminals in our virtual world because of the real life damage they do. If some financially unsophisticated person develops a relationship with another avatar and is persuaded to invest thousands of real-world dollars in a pyramid scheme and is swindled, it is no longer just a game and it's not just the Internet and the shame and loss are quite real.

Yeah, but aren't the fake banks gone? Even though Linden belatedly banned the "banks," I believe these Ponzi schemes continue under the guise of "virtual stock markets", with the daily interest rates being replaced by similar, if more irregular, "stock dividend" payouts. And they are intimately connected to the banks. The failed bank Ginko, instead of holding a portfolio of loans like a real bank, claimed to much of its money in virtual stocks. And many of the surviving banks "reincorporated" as other kinds of "companies" which are traded on "stock exchanges."

I'm not saying that every exchange is crooked or every company issuing "stock" is the front for an illegitimate scam, but overall this whole thing reeks of conflict of interest, lack of transparency, and worse. It is very much buyer beware out there.

But I'll continue these thoughts another day.