Law journal takes on Ginko Financial
By Adam Reuters
The Journal of the Business Law Society has published an analysis of Ginko Financial, drawing from my interviews with Ginko CEO Nicholas Portocarrero and Linden Lab’s Philip Rosedale in October.
The authors never quite answer the question they pose in the title of the article: “Virtual Bank, Real Scam?” (Note to editors: that headline formulation has been seriously overused and should be avoided at all costs).
But they do conclude that Rosedale, who mused in his interview that banks like Gingko may actually emulate the Nobel-prize winning Grameen Bank, “has things backwards. Grameen makes no secret of who they are, what they are, or how the bank works. Grameen is the one who trusts that borrowers will repay their loans. The risk is borne entirely by Grameen and the relationship between Grameen and its borrowers is a close and active one. Ginko is the exact opposite.”
The authors also warn that Linden Lab may actually be vulnerable to litigation if banks like Ginko turn out to be pyramid schemes, as many suspect:
“By not taking efforts to ensure that commercial activity in Second Life is conducted in a transparent manner, Linden Lab is in essence putting their stamp of approval on ventures like Ginko. … If a court determines that Linden Lab is liable for fraudulent activities that take place within Second Life, they may be overwhelmed with suits. To avoid liability, and governmental regulation of the commercial activities within Second Life, Linden Lab should develop rules and policies that ensure commercial transactions between users are transparent and legitimate.”
