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Recommended Reads: Exodus of the Scammers

"As of January 22, 2008, it will be prohibited to offer interest or any direct return on an investment (whether in L$ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter..." (Linden Labs)

Second Life saw in-world banking activities throughout the past years with close to thirty lending institutions setting up their “business” in SL. A lot of them seemed to be dubious, offering unsustainably high returns, even resembling lendings-schemes where you are prompted by badly written emails to donate money to some third world bank account.
One of the most prominent cases was the demise of Ginko Financial in August 2007. Being founded by a member called “Portercarrero” (possibly one Andre Sanchez from Sao Paolo), and initially heartily embraced by Linden Labs’ founder Philip Rosedale, Ginko offered a 100 percent rate of interest (talking about unsustainably high returns). The rate quickly dropped to 44 percent yield per annum, all along with a daily withdrawal cap of approx. USD 19. Being cornered by intellectual property lawyer Benjamin Duranske, Portercarrero came to admit that he could not cover withdrawals. The affected residents went hyperbolic after this news, but it was too late already: the money was gone, after all a sum of around USD 750,000. Portercarrero had changed the corporate legal status of Ginko, yielding only pennies on the dollar. The Ginko depositors reacted with a class action lawsuit, but it’s highly doubtful if they will see their money again. (jackmyers.com has an insightful report about Ginko).

Yesterday, as a reaction to all these events, Linden Labs announced to effectively close down all banking-activities from 22nd of January on for non-official financial institutions:

“As of January 22, 2008, it will be prohibited to offer interest or any direct return on an investment (whether in L$ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter…
Usually, we don’t step in the middle of Resident-to-Resident conduct – letting Residents decide how to act, live, or play in Second Life. But these “banks” have brought unique and substantial risks to Second Life, and we feel it’s our duty to step in...”

Sometimes it seems to be necessary to protect players from themselves. However, with Linden Labs’ pledge “We ask that between now and then, those who operate these “banks” settle up on any promises they have made to other Residents and, of course, honor valid withdrawals,” probably the exodus of the scammers is ushered in: Nobody can keep these operations from just grabbing the money and run. Even for a honorable business, it would be close to impossible to settle their accounts if the amount of disbursements is around tenth or hundreds of thousands of dollars to thousands of clients in just two weeks. 

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