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Financial Crisis! Of the Virtual Kind

Posted by in Industry News

The Wall Street Journal reports San Francisco based Linden Labs has shut down more than a dozen virtual financial institutions in it’s online world Second Life.

Second Life is an elaborate online world where players create new identities for themselves — images called avatars. These avatars can own land, run businesses and build homes.

The “delete key was hit” so to speak after complaints by Second Life players that some of the institutions were refusing to pay promised high returns on Linden Dollars banked with them. Banks are run by players rather than Linden Labs themselves, and are funded with real money when players of the game purchase Linden Dollars at an exchange rate using PayPal or a credit card. The termination of some of these services has caused a real-life bank run by players who had deposited funds.

Though some players managed to get their Linden dollars out, others are finding that they can no longer make withdrawals from the make-believe ATMs. As a result, they can’t exchange their Linden-dollar deposits back into real dollars. Linden officials won’t say how much money has been lost, but a run on another virtual bank in August may have cost Second Life depositors an estimated $750,000 in actual money.

More information on WSJ.com.

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