SAN FRANCISCO:Second Life is banning unregulated banks from its virtual world after a run of defaults by financial institutions offering interest rates unobtainable in the real world and unsustainable in a virtual one.
"These banks often promise unusually high rates of return, reaching 20, 40 or even 60 per cent annualised," it said.
The complaints follow the collapse of Ginko Financial, one of the virtual banks, last August. There was a run on the bank that depleted its reserves as investors queued up at virtual ATMs to withdraw their money. Ginko, which had been offering interest rates of more than 40 per cent a year, ran out of funds, owing customers more than $750,000 (€506,799) in real world money.
In an analysis of the Ginko collapse last year, the Journal of the Business Law Society warned that Linden Lab could face real-world litigation from victims. Financial institutions in Second Life have been targeted by scams and hackers. Second Life has nearly 12 million registered residentsand about 340,000 users spent money inside Second Life in December.
