Ginko Financials is apparently experiencing a run on their bank, meaning everyone wants their lindens out of there, and who can blame them with all of the shady stuff that appears to be going on in the unregulated world of Second Life finance. What can be going on there that they still offer a .10 daily interest rate, which works out to about 44% interest for the year, a pretty good return no matter what the currency is, as a matter of fact it’s still too good to be true. Ginko’s interest rates have always been high, and most banks in SL appear to be offering rates that are too good to be true. So, combine the theft at the WSE, the problems with Ginko and the fact that lindens are not backed by anything and are pumped into Second Life at the discretion of the Lindens, and we have a recipe for disaster, and this recipe is about done. Check out the notice posted in the Ginko Financials website, I have pasted the relevant parts below.

About a week and a half ago, we saw an increased number of withdrawals; the time to speculate as to why this happened has since come and gone, so I will leave it at that. No matter what started it, the result is the same: We have expended every possible short-term resource, and are still unable to meet the current demand for funds. We have attempted several different things to remedy the situation (which is in short why the interest rates and limits have fluctuated wildly), but none of them turned into a viable permanent solution.

For the time being, we have decided to continue doing business normally, but leaving the withdrawal queue in place with an expanded L$1,000,000/day limit, to give an indication as to where the end of this situation may be. However, a realistic estimate could possibly extend in to the realm of several months.

For those of you who wish to withdraw your funds, you may wait in the queue, or cash out to Ginko Perpetual Bonds, which is currently the only option if you don’t wish to wait the seemingly indefinite period of time it could take to refill the reserves. Source: Ginko Financials

So, they are taking deposits still and they are then paying those deposits out to existing customers who are trying to get their money back. How is this possible and how can they “look” their new customers in the avatar and feel good about letting them think they are actually going to be able to get their money out. I read somewhere that they just kept a little bit of the lindens on hand and invested the rest, what happened to all of the money they took from depositors in good faith? Why have they not liquidated all of their holdings to pay back their customers? A post at your2ndplace, a great blog that has been on top of this the whole way, asks this question.

A Coincidence?

But there is something in common with HCL, GPB and GCS. Nicholas Portocarrero is the major shareholder in HCL - which, by proxy, puts him heavily invested in WSE. And guess who is listed on GCS and GPB as a Non-Executive Director? Lukeconnell Vandeverre, the CEO of HCL.

Is it a coincidence that these two names have been coming up a lot in the timeline since the WSE was ‘hacked’? Doesn’t it seem odd that when Nicholas Portocarrero is having trouble raising enough money to handle withdrawals that he would be investing in Hope Capital?

What’s going on here? I’m not saying anything - but there are the facts right there. How do we explain these facts? Source: Peering Into The Depths of Ginko Financial

Many have said that what Ginko is doing is illegal and most certainly fraud, and it certainly appears that way to me, taking one persons money in good faith and passing it right out the ATM into someone’s hands who are trying to get out of this mess. Benjamin Duranske of Virtually Blind.com has a huge post about the Ginko Financials troubles here, Commentary: Ginko Wrapup - No AVIX, IPO, or Funds and he says this won’t be over until someone is in jail.

If what you were saying was true, then they would close down deposits. What this indicates, to me is two things. 1) at some core level, they actually believe this might magically still work, and 2) they are hoping that as long as they leave it running, they won’t be prosecuted or sued.

But leaving deposits open when they go DIRECTLY from the depositor to the pocket of a previous depositor is so transparently criminal that I can’t even give them much credit for #1 any more, and I’ve been someone who has consistently said they bought their own nonsense, even as one of the loudest critics of their facially illegal methods.

Think about this — they knew how much money they had five days ago when they were offering 148% interest on 30 day term deposits. You think they’ll be paying those in, now, 25 days? Every penny that they take right now saying it’s a deposit that will earn interest is undeniably fraudulently received. Source: It doesn’t count for anything…

I wonder how the Lindens think their no banking policy because we don’t want to make everything complicated is working out now?

Added: Ginko Financials shutting down And Ginko Financial Closes It’s Doors (Updated:10:06 pm SLT - Now Official).

Popularity: 8%