WSE announces Midas Group are bankrupt

by Eloise Pasteur Nov 3rd 2007 at 8:45PM

Filed under: Business models, Economy, News items, Second Life

Following the calls in Second Life by the Midas Group to boycott Hope Capital and WSE for failure to pay on bonds, WSE today declared the Midas Group bankrupt.

The full statement (below the fold) makes interesting reading in one paragraph saying "the reasons are not our concern" and in the next explaining why they think the bank went under. Nothing to do with late payments from their own bonds of course. The value of the various Midas Group bonds have been transfered to the WTF rescue scheme, straining it yet further.

[UPDATE: Midas Group have responded. Their response is also below the fold]

WSE Statement:
Midas Commons, CEO of Midas Bank yesterday informed the World Stock Exchange that the Midas Group of Companies are bankrupt.

The WSE accounts controlled by Midas Commons were locked while we reviewed the situation.

The cause of this bankruptcy is not our concern as the WSE is not responsible for the decisions and actions of Midas Group and its management. Midas Group and its management team are responsible for all the financial and operational decisions.

The WSE has believes that the Midas Group of Companies were Over-Leveraged and did not hold sufficient cash reserves to allow for the potential risks and impact of increased customer withdrawals, lower than expected earnings from investments along with regulatory and economic challenges.

The World Stock Exchange has now delisted the following Midas Group of companies to ensure that shareholders will have the best possible chance to earn a return on their investments through capital growth and dividends using the WSE Traders Fund:
Midas Group High Yield Bonds (MGB)
Midas Group Financials (MGF)
Midas Development Company (MDC)

Conversion rates:
OLD ---- NEW WTF SHARES
MGF 1 - 1
MDC 1 - 1
MGB 1 - 100

All shares in the above companies have been transferred to the WSE Traders Fund (WTF) which has a higher Net Asset Value per Share than the above companies had due to the removal of shares previously owned by Midas Commons.

The World Stock Exchange has requested that Midas Group provide the WSE with the most recent list of Midas Banking customer avatar names and balances so that the WSE can issue former Midas Bank customers with 1 share in WTF for every L$1 linden held in Midas Bank.

This will ensure that Midas Bank customers will have the best opportunity to minimise the loss and impact resulting from the bankruptcy of Midas Bank.

The WSE will post an announcement when it receives a response to its request for the former customer list of Midas Bank.

Midas Group announcement (via notecard from an ATM)

ON Nov. 2nd 2007 Hope Capital and the WSE, despite having an ample supply of lindens, blatantly withheld payment due on a 3.5 million linden dollar Hope Capital corporate bond issue that they had sold to Midas Bank this past summer(ticker HCB).

Midas Bank protested and in response a malicious and aggressive action was taken against Midas Bank by Hope Capital. In an act of brazen thievery and tyranny, Midas Bank's shareholders' stock on the WSE was dissolved, thousands and thousands of Lindens in a Midas Bank WSE account were confiscated, and any and all Midas Bank holdings on the WSE were liquidated, seized, or converted into a fuzzy and nearly worthless financial unit called the WTF.

After this, a false announcement was posted on the WSE that Midas Bank and all its Second Life financial businesses had suddenly gone bankrupt for mysterious reasons.

Hope Capital clearly wishes to destroy Midas Bank so they can cancel the roughly 5.5 million linden dollar debt that they owe Midas Bank. They owe this money fair and square with no strings attached. The bank is insolvent until this situation can be resolved. The avatar named LukeConnell Vandeverre is solely responsible for the decisions that created this event. He is the boss of the WSE (he calls himself the CEO) and it was he who sold the bonds (bad paper), he who decided not to pay what was promised and owed, and he who dissolved all Midas Group Financial assets on the WSE without consulting anyone about it first. He has no regard for any rules, regulations, or honor code. We need to all work together to resolve this situation promptly. The ATM is offline in the interim.

Tags: breaking, hope-capital, linden-lab, midas-group, second-life, wse

Reader Comments (Page 1 of 1)

Ghen said on 9:28PM 11-03-2007

Second life stories make me say WTF... how is this a game that entertains?

Eloise Pasteur said on 9:40PM 11-03-2007

Many, including me, would say SL is not a game - it has none of the structures of a traditional game. It is easiest to define it by its very name: It's much more like a second life, with structures and activities that are basically 100% your choice.

Becoming part of the SL economy is not required, although very few people don't shop at least occasionally in my experience. Becoming involved in the economy at the sort of level of stock exchanges, banks etc. is certainly a minority activity - just like in real life - but it's obviously of interest to some.

What makes Second Life gripping? I don't think there is a single answer to that. My answers about why I'm still in SL have changed over the 3+ years I've been there. And I've been in SL basically on a daily basis over all of that period.

One of the reasons I would say has persisted is the contacts with people, the friendships and the like, so the social networking if you want a posh term. But it's more than just that - facebook and the like don't do it for me - there's something about that 3D presence as well which makes it more compelling. Although not for everyone, one of the additional things in the mix for me is that I work in SL, about 90% of my RL income comes from working in SL, but this hasn't been a consideration for all of the time.

I'm sure if you ask our other SL writers, you'll get different answers though.

Lowell said on 10:09PM 11-03-2007

I've run a little story on this as well -

http://www.sloz.info/2007/11/04/world-stock-exchange-the-latest-controversy/

I really do feel that until there's some sort of regulation, the whole financial in Sl, it's all a joke - just not a funny one.

Eloise Pasteur said on 9:46PM 11-03-2007

I'm inclined to agree Lowell, although getting regulation will require some significant changes at LL.

If I can avoid giving information as a CEO to tie to me personally, and so avoid responsibility, or make it hard to assign, why would I not do so? I guess I'd have to add, I certainly wouldn't do so if I intended to defraud people, but most of our financial regulations are really to force compliance, however ineffectively.

An Australian friend of my commented that running a Stock Exchange in Australia is illegal without some form of licensing. Could you comment on that?

Lowell said on 10:15PM 11-03-2007

Eloise - yes my understanding is that stock exchanges in Australia are heavily licensed / regulated. I imagine that's why Luke is so insistent on WSE being a game.