everything looks perfect from far away

I just read an article from Wired where a “virtual investment bank” recently collapsed in the computer simulation world of Second Life. For those that don’t know, Second Life (SL) is a computer game played on the Internet, were you create a character (or avatar) that can do anything. Literally, anything. Eat, drink, sleep, play sports, sex, start and run a business, murder… the whole nine yards.

In any event, someone created an investment bank in this fake computer world promising 60% returns. And people invested fake money (called linden) in to this back, hoping to make linden back. Here’s the kicker. You can buy linden with cold, hard cash (electronically). The current exchange rate is between 277 and 288 Linden (L) for $1US.

In any event, this guy setup this virtual bank, Ginko Financial, promising great returns. And suckers invested in this. How much? About $200,000,000L (~$750,000US). Then the bank “collapsed”. Holy crap! This is not a real bank. It is not FDIC insured. Yes, there are stock markets in this virtual world, but it is purely virtual. And to top it off, there are 20 to 30 other banks that operate the same way.

What a great scam. I’m not even sure this is illegal, because it is in a virtual world. There are no law-binding documents stating that this bank (or any bank in Second Life is FDIC insured), nor that it is even a bank. SL businesses don’t have to register with the state of California for a business license. Banks don’t need to get SEC/FTC permission. What a great scam. I’m just shocked how many people thought they would be getting so much money back.

In truth, according to the article, most people had between $50 and $100US invested. Not too much. But some people had $10,000US. Wow. I’m flabbergasted. But now the federal and state governments are getting involved. Maybe these people will get a second chance at being morons.