I had to write about this, because if it's true.. and I stress the if, then it's the best news ever to hit Second Life financial sectors. Lindsay Druart, CEO of LNL, has claimed that all of the funds lost in the banking heist incident has been recovered through Linden Labs (LL).. that the bank has in fact been compensated for the massive hack/fraud attempt.
If this is true it would be the first time I've ever heard of Linden Labs stepping in to help any player involving third party software recover funds due to an abuse or an exploit, particularly on this scale. It makes me wonder why when so many of the other banks have gone down in the past due to similar issues, they had not stepped in. It also is such good news that my speculative nature makes me have to second guess my trust of the claimant, again. I wish there was a direct method of verifying the claim as if so I'm sure a substantiated proof of this would radically impact the Second Life markets in a positive manner. In the past, investors large or small had absolutely no recourse when something went horribly wrong.
That said, I've not noticed significant market activity, that couldn't be associated with insiders on any issue on CAPEX or any other exchange this week. It's actually been rather slow. That said, I'm anticipating business as usual as the holidays approach baring new product ideas or new news. On the other hand VSTEX has seen a flurry of new offers that makes me wonder if the community standards protocols are going to be effective in preventing fraud on that exchange.
When I headed an exchange as AVIX's operations officer, I found that 90% of all proposals were either bad, or fraudulent in nature. Even the ones that passed the screening, of them, 1 went bad.. and there were about 8 other corps that made it through the screening. The bad one was CYB, which is no longer listed on CAPEX. I've been accused in the past of granting bias for the CEO of CYB because their avatar was a dragon lady, which is ridiculous.. given I'm married and that'd be the same premise as granting favors to someone else who is also the same rl ethnicity, especially when the person behind the PC happens to be a male it makes the premise even more rediculous. I knew quite a bit about that CEO, but the parties who make the accusations have no idea of the levels of precaution I took to attempt to protect the investors of the old AVIX exchange. My interrogations tended to be rigorous. I required a method of RL identification. Even Lindsay Druart herself was verified by me at one point, although I questioned her twin exchange listings on WSE and CAPEX. I verified her by tracing her internet account back to its listing source using WHOIS.net functionalities and checking her domain's ownership on several of her internet sites. Some of it can be faked, but it really depends on the ISP and how they do their listings. I no longer trust GoDaddy, anyone can get an account there it seems regardless of proof of identity. I kept my methods secret at the time because I didn't want a potential fraudster to have the opportunity to prepare themselves for interrogation and the best remote background search I could sustain. I never got more adventurous than remote verification because I've always been concerned that anything more may actually be a breach in Linden Labs privacy policy/terms of service and that would end my short career in second life finance.
With that tangent done, back to my point, any exchange witnessing explosive growth will more than likely experience higher than comparative rates of fraud for more cautious exchanges. This has proven true in the WSE/CAPEX comparison. WSE has delisted many companies that have failed or proven fraudulent enterprises.. you just wouldn't be able to tell it because delisting usually means a complete wipe of all history of that corporation's existence. Their monthly rate of delisting has also been higher over the course of history. I'm expecting their rates to fall though. The criteria used on WSE seems to be tightening and I'm hoping that will result in improved performance, especially in the area of fraud deterrence.
Banca D Italia has not paid interest on my account since 11/20/2007, the date I isolated their programming issue. I'm very concerned someone got to them first as, why else would the interest accumulation halt? Thus far withdrawing and depositing has not been effected, but this activity is strange and so far messaging to them via their website and IMs has gone without a response. The day I reported the issue, the owner of the bank said they should be able to isolate any strange transactions and the programming problems with the atm were fixed as far as I could tell. I'm hoping they've not mistakenly pegged their savior's account as an aggressor in their search to isolate any questionable transactions, that'd be a real pity if such ingratitude were mistakenly displayed. I'd hate to have to stop using their bank, the fund's money must work.
Tuesday, November 27, 2007
LL moves to save LNL? LL waking up finally? VSTEX growth rate dangerous? WSE wising up?
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Lindsay reported the problem promptly, and to the right people and using the right procedures. Linden Labs didn't have to take a few days forwarding emails and goofing around, instead the right accounts were locked down quickly. They were able to lock down the accounts before the money was cashed out on currency exchanges. Lindsay told me she was right on top of it and reported it within moments of it happening. If Lindsay had been away in her vacation retreat and not reported the problem for a couple of days things might have not gone as well.
Bout time Linden Labs stepped up to the plate for someone. I wish she'd post a screen shot of the return, that'd be equivalent to a war-trophy in this environment.
hmmm, maybe there's a niche here for a third party to monitor for fraud among client banks...
I would definitely say there is. But the best proof comes from the source. My open disclosure policy for DGD leaves every asset and dollar accounted for in the public eye through my company home page. If other CEO's took such an open stance the room for questions greatly diminishes. I wish that were true for the general market, that CEO's were more pro-actively forthcoming and detailed with their reporting.
I doubt that this would happen, but it would be great if Linden Lab incorporated a method where Linden dollar balances and transactions can be view by other users, say those given a secondary password. This would permit third-party monitoring while maintaining the integrity of the account. I could easily see corporate avatars being under such a watch. Alas, that would likely be too specialised of a request for LL to consider.
Kailen, this is an interesting idea, and I think some form of it is what would be needed for the SL economy to evolve beyond a simple resident-to-resident truck and barter system.
In the developed economies in RL the concept of corporate personhood is well evolved, and this is a key distinguising feature of these economies from less developed economies.
In the US for example, a corporation has certain legal privileges and immunities, but also has specific obligations (filing financial reports, transparency, etc) that individual citizens do not have.
On the other hand, both anarchocapitalists and syndicalist anarchists would hate this idea, since it imposes a legal structure on SL, and would make these systems in their pure forms all but impossible.
In that sense, it would ruin SL, since corporations would flood in to dominate the SL economy. One of the charms of SL is that it feels like a village where people are just engaging in simple trade. That would go away.
The role-play aspects of SL would also be diminished. RP would be just another commodity in an corporate virtual world.
And who would enforce the contractual obligations of the corporate avatars, LL?
Lots of thorny issues here...
I agree, Kailen, that it'd be awesome if such transparency could be achieved.
There's something Linden Labs could do that'd be easy for them that'd go a long way towards allowing us to get that kind of transparency:
You know how you can download a CSV of your transactions from the website? If you could also get a digital signature on that signed by Linden labs, then CEO's could download and publish their logs, and the signature could be verified to show that the log was not altered.
Edgeworth said, "In that sense, it would ruin SL..."
I think that in the long run, SL will be ruined in a lot of ways as it continues to evolve and-- what's the word I want here: mature? Gambling's gone, and I'd be surprised if there's not a long list of other activities that will die as part of the "maturation" of SL. What other activities? I don't know, but I expect that long term the activities that will be banned is anything you can't talk about in church or in front of the US Government.
So much for the powerless fed portrayed in snow crash :-P
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