PointofLaw.com
 Subscribe Subscribe   Find us on Twitter Follow POL on Twitter  
   
 
   

 

 

Second Life Banks Court First Virtual Class Action



Today was the deadline for banking institutions operating in Second Life, an online alternative universe, to shut their doors and refund deposits. The LA Times reports that Linden Lab, creator of Second Life, mandated the shutdown folowing the failure of Ginko Financial, a shady virtual bank that formerly offered double digit interest rates to virtual depositors. All commerce in Second Life takes place in Lidens: a unit of virtual currency that generally trades against the US doller at a rate of about 270:1.

The Ginko failure alone eliminated about $75,000 of deposits. There is no word yet on what additional funds may have been lost in the unwinding process scheduled to end today. Cornell professor Robert Bloomfield believes that "no individual seems to have lost enough money to make filing a lawsuit worthwhile," but I think he may lack imagination. Does anyone want to bet that a class action suit will be filed in California, home of Linden Lab? Oh, wait, gambling has already been banned on Second Life due to legal concerns.

The article also mentions that Second Life's virtual securities took a tumble as a result of the current financial crisis. Sarbanes-Oxley, anyone? After all, Second Life already has its own bar association.

 

 


Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.