by Alphaville Herald on 06/08/07 at 12:46 am
L$200,000,000 in obligations, no liquid assets — queue up and wait
by Pixeleen Mistral, National Affairs desk
Sunday afternoon, GinkoTec and Ginko Financial honcho Hinoserm Rebus sent a notecard to customers who have deposited Linden space bucks in the role-play bank known as Ginko Financial. The notecard and announcement at the fictional bank’s web site inform customers that they have two options for withdrawing their funds – get in the queue, or if they prefer not to wait “the seemingly indefinate period of time it could take to refill the reserves”, accept space buck “perpetual bonds” which someone might possibly want to buy on the open market at some point. Maybe.
According to Mr. Rebus, there is now a L$1,000,000/day limit on withdrawls. But Ginko Financial president Nicholas Portocarrero informed the Herald this evening that Ginko has approximately L$200,000,000 in obligations (about $740,000 USD), so this suggests it could be be the better part of a year before some depositors see their money – if they ever do. As of this writing, the savings deposits claimed at Ginko Financial’s web site were L$118,429,950 – so perhaps paying 60% interest is catching up with the “bank”? According to Mr. Rebus, there is L$30,000,000 in pending withdrawls at this point – so the L$1,000,000/day limit seems ineffective at stopping capital flight from the “bank”.
Given suggestions of ponzi scheme-like scams in play, and enough money at risk to make some sort of class action lawsuit a possibility, the situation at Ginko looks bleak. With sources suggesting that Hinoserm Rebus and Nicholas Portocarrero may be alternate accounts run by the same RL typist – a suggestion which both avatars strenuously deny – the lack of transparency in Ginko’s governance presents problems to those who would like to believe in the bank. The clouded Ginko situation is not helped by Mr. Portocarrero complete refusal to explain where he has invested his customers money – but this is how Ginko Financial has always run its business.
To address these issues, the Herald interviewed both Mr. Portocarrero and Rebus independently.
interview with Nicholas Portocarrero
Pixeleen Mistral: Nicholas, I was surprised to see a notecard from Hinoserm about the Ginko Financial situation today. I’m sure you can see how this coming from Hinoserm rather than you would lead to all sorts of speculation – now Hiroserm just contacted me, but I’m still very interested in your take on this
Nicholas Portocarrero: What speculation?
Pixeleen Mistral: speculation that you are going to disappear with whatever fund there are and never return – then there is speculation that you and Hiroserm are alts
Nicholas Portocarrero: I’m not his alt, and he is not my alt. I’m also not running, though restructuring might be necessary
Pixeleen Mistral: when will you publish an accounting of your “investments”?
Nicholas Portocarrero: Never
Pixeleen Mistral: i see
Pixeleen Mistral: because you can’t? or because it would tend to implicate you?
Nicholas Portocarrero: Because it was never part of the deal
Pixeleen Mistral: so the deal was people give you money and you might give some back, maybe?
Nicholas Portocarrero: The deal was, you loan me some money. I’ll pay you interest and do my best to pay you back. I cannot pay 25% of everything back all at once. So the loan might need to be restructured, so that it is no longer in the form of an account balance. Accountholders are not shareholders and no disclosure agreement was.. agreed to.
Pixeleen Mistral: why did you make promises that you were very unlikely to keep? this whole thing looks like a long running scam
Nicholas Portocarrero: I understand
Pixeleen Mistral: and I am surprised you are still trying to make it continue. at what point do you give up?
Nicholas Portocarrero: I am not running away my debt
Pixeleen Mistral: then you plan to sell some of your land in SL?
Nicholas Portocarrero: No.
Pixeleen Mistral: that can be turned into cash quickly
Nicholas Portocarrero: Cash that cannot pay off my debts. as such, selling it off would acomplish nothing.
L$200 million in debts
Pixeleen Mistral: what is the total size of your debts right now?
Nicholas Portocarrero: Around 200mil
Pixeleen Mistral: L$?
Nicholas Portocarrero: yes
Pixeleen Mistral: with the interest you have, what will it be next month? and at what point do you simply declare bankruptcy and bail?
Nicholas Portocarrero: I don’t know what kind of answer you want from me. Bankrupcy will not be declared and bailing will not take place
Pixeleen Mistral: so what should people who “invested” with you expect? a year wait? or more? maybe Hiroserm has an answer?
Nicholas Portocarrero: Most likely what will happen is this. All account balances will be converted to bonds, with a face value of L$1. Interest payments will be made and slowly they will be bought back and cancelled. Anyone unwilling to wait, may sell them to the market
Pixeleen Mistral: what is the expected timeline for this?
Nicholas Portocarrero: To buy back and cancel all the bonds?
Pixeleen Mistral: yes
Nicholas Portocarrero: I don’t know, but it will not be fast.
Pixeleen Mistral: make a guess
Nicholas Portocarrero: Why?
Pixeleen Mistral: so that your “investors” might set their expectations based on your insight into the situation – without some confidence in you, the chances of future financing seems dim and without some idea of what will happen, I find it hard to see how anyone would have confidence. your proposition has been “trust me”, but that trust is seriously eroded now. without an accounting of where the money has gone, and what the expected payback is, why would anyone go along with this?
Nicholas Portocarrero: Define go along with this.
Pixeleen Mistral: I wonder if this is all going to end up in RL court somewhere? some might think that this is massive on-going fraud
Nicholas Portocarrero: And how exactly is it a fraud?
Pixeleen Mistral: you know what a ponzi scheme is, right?
Nicholas Portocarrero: Yes, I do.
Pixeleen Mistral: cool
Pixeleen Mistral: anything you want to tell the Herald readers? have I missed anything important?
Nicholas Portocarrero: Yes, you have missed the fact that I have not ran away from this debt.
Pixeleen Mistral: I’ve been trying to see if you have a credible plan to repay the debit, and its not adding up for me
Nicholas Portocarrero: According to the standards used by some people, millions of people and major institutions would be engaged in ponzi schemes. Any person with a credit card debt would have to go to jail
Pixeleen Mistral: thanks for talking and good luck. I hope it all works out.
interview with Hinoserm Rebus
Hinoserm Rebus: Nicholas doesn’t have very many people skills. I don’t think he understand the importance of announcements. If it were left entirely to him, nobody would ever hear anything about anyone.
Pixeleen Mistral: I see
Pixeleen Mistral: one source who contacted me says he suspects that Nicholas may not really exist
Hinoserm Rebus: A very interesting theory
Pixeleen Mistral: is there anything you can do to lay that theory to rest?
Hinoserm Rebus: Surely you’re not implying that I’m playing the role of Nicholas. He’s not a native English speaker, that should be apparent to anyone who’s lived in the online world for more than a couple months. But, that aside. I lost my train of thought.
Pixeleen Mistral: well some people suggest a connection, and your avatars birth dates are close. another issue that I am hearing from several sources is that the connection between GinkoTec and Ginko Financial means that GinkoTec ought to liquidate assets to cover for the bank
Hinoserm Rebus: I’m really not sure how that connection was made, exactly. For all purposes, GinkoTec sold/sells the technology that maintains GF and the services (me) to maintain it.
Pixeleen Mistral: GinkoTec owns the land where one of the branches of the bank is, and I believe the phrase used was “implausible deniability” that they are not in fact overlapping ventures
Hinoserm Rebus: I guess since I pay for GinkoTec, and GF pays my salary, you could say they’re connected in that regard. But GinkoTec isn’t a company in any regard, nor is it about making money — it’s a group for me and my friends, and people like us who have the same ideas. Ask anyone in the group — they’re not paid, with the exception of a few that help with GF support.
Pixeleen Mistral: so no plans to sell land in SL to cover Ginko Financial’s withdrawls?
Hinoserm Rebus: If I sell my land, it will be to pay my bills because of the money I’ve lost inside GF, should that occur.
Pixeleen Mistral: Ginko Financial also has some land of its own though
Hinoserm Rebus: Maintaining Ginko Financial is both my full-time job, and main source of income. Ginko Financial and… Von Mises something, I think, yeah
Pixeleen Mistral: is Ginko Financial still paying you a salary?
Hinoserm Rebus: Would it matter? There’s no L$ to pay me it with.
Pixeleen Mistral: it must be hard if that was your job – what are you planning to do to support yourself?
Hinoserm Rebus: If GF ends up going away? I still have the software, I might consider selling it — or using it again. I designed the software as a universal platform. It could just as easily be converted to a billing system for a shopping site — which was something we had planned to do. Or something akin to PayPal, accepting payments for other sites
Pixeleen Mistral: right – probably some demand for that
L$30 million pending in attempted withdrawl queue
Pixeleen Mistral: then there is the speculation that the only reason for maintaining the bank at this point is to move the remainder of the assets out of Second Life
Hinoserm Rebus: Lemme see if I can explain how I understand what’s going on right now, and what lead to my notice. Nicholas basically came to me yesterday and said that it was nearly impossible to liquidate enough assets fast enough, and that he wanted to convert everyone’s account balance to GPB (Ginko Perpetual Bonds or something like that) on the WSE. I’m not too keen with that idea, for many reasons — I don’t like WSE, I don’t think it’s a good idea, it’s not going to solve the problem, and, well, it still leaves me out of a job I’m not the best at explaining, so forgive me if this stops making sense Basically, to bring L$ back into SL, it’s going to mean selling off alot of investments Nicholas has started up — from what I understand, these are small web businesses and SL businsesses that looked promising, but aren’t actually worth much yet. Sure, selling them would mean being able to pay off the withdrawal queue (about 30mil last I checked), but it would leave how much more unpaid, and no potiential to ever continue making money. Effectively, the emergency plan of converting to the bonds would be useless, too, since (I imagine) the same investments are funding those as well. It would just be bad all around
Pixeleen Mistral: I think it would calm everyone if those investments were made public so that people could clearly understand the likelihood of them paying off
Hinoserm Rebus: I agree, but that’s not my choice
Pixeleen Mistral: btw – do you have a way to contact Nicholas in RL?
Hinoserm Rebus: I had his contact information at some point — knowing me, I still do. I have files from decades ago. Yeah, I still do
Pixeleen Mistral: good to know
Notice Regarding Current Situation 08/05/07 02:57:38 PM EDT___________________________________________________
I would like to personally try to explain some of what’s been going on.
About a week and a half ago, we saw an increased number of withdrawals; the time to speculate as to why this happened has since come and gone, so I will leave it at that. No matter what started it, the result is the same: We have expended every possible short-term resource, and are still unable to meet the current demand for funds. We have attempted several different things to remedy the situation (which is in short why the interest rates and limits have fluctuated wildly), but none of them turned into a viable permenant solution.
For the time being, we have decided to continue doing business normally, but leaving the withdrawal queue in place with an expanded L$1,000,000/day limit, to give an indication as to where the end of this situation may be. However, a realistic estimate could possibly extend in to the realm of several months.
It may be hard to believe that we would expect people to stick with us, especially after how poorly this situation has been handled, but a large number of you continue to show your support, and I still have hope of a second chance at fixing the problem.
For those of you who wish to withdraw your funds, you may wait in the queue, or cash out to Ginko Perpetual Bonds, which is currently the only option if you don’t wish to wait the seemingly indefinate period of time it could take to refill the reserves.
I would also like to personally appologize for the lack of communication and the diminishing customer support during all of this, but through all of the changes that were being made it is impossible to keep my support staff fully informed, and usually I am the last person down the line to receive factual information — and too often the first person to relay that information to you.
I thank everyone for your continued support of Ginko Financial, and hopefully with time we will be able to continue through this situation and get things put back right.