Friday, February 15, 2008

Linden Lab Bans Banking in Second Life

Without much fanfare, Linden Labs announced on January 8, 2008 that any Second Life banking and investment business which might, "offer interest or any direct return on an investment" in ANY currency, would be prohibited from doing so as of January 22, unless these activities were performed by an organization with, "proof of an applicable government registration statement or financial institution charter". This policy decision followed the past few years maelstrom of SL bank closings about which most of us have heard, and through which many SL residents have suffered.

The sad fact is virtually all such SL financial 'institutions' were ineptly run at best, Ponzi schemes at worst, and largely the worst case. Although some SL banks being run by financiers with real world creds, and tossing out enough jargon to impress a B-school grad, the bottom line is - Second Life financial trading and banking in particular, has been a bad investment.

One wonders what was behind some of the banks that went under, and I'd like to offer some small insight from personal experience.

Last year this time, I was hired as a freelance writer by a person who owned a reasonably successful SL bank, as they began to launch SL real estate ventures, primarily 'planned residential communities'. They intended to 'go public', which means to offer shares in their firm for investment by any interested parties. This is done through one of the SL stock exchanges.

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