Bank Theft Highlights Downside Of Virtual Currencies

The Business Insider ^ | 7/2/09

[FromLori]

Virtual currency is turning into a multi-billion dollar economy, and much of that money sits in virtual banks that exist outside normal government regulation.

So what happens when fraudsters wake up to the laissez-faire virtual economy?

And worse, what if the one of those fraudsters happens to be the bank CEO?

Something bad is what happens.

Reuters has the blow by blow of the recent news that the CEO of a bank in the game EVE Online stole $5100 from his depositors in order to pay some real world debts.

Ricdic, the CEO's character in the game, "embezzled about 200 billion interstellar kredits," from EBank, the largest player-run bank in the game. Richard, the 27 year old man behind Ricdic, used the cash to pay for a house and medical bills for his family. He was kicked out of the game, but not for the reason you think.

Stealing money from other players? No. Committing fraud or crossing a, ha, regulator? Nope.

He was tossed from EVE because he sold the stolen kredits to another player, in exchange for the real world money.

"We have never seen ourselves as gods who make the rules of social interaction," said Eyjolfur Gudmundsson, an economics adviser to CCP. "You are able to lose the things you have created. That's what makes the world interesting."

Richard lives in Australia, the game was developed in Iceland, and the 300,000 players who play live all over the world. That would make the chances of a meatspace prosection pretty unlikely.

The whole thing is troubling because billions of real dollars are now flowing through online games and banks and goods and services as virtual money

As we noted, many big companies are getting into the act, including Facebook. What happens when and if someone figures out h

[1rudeboy]

Nobody panic, according to EBANK's website:

There are a number of wildly inaccurate news stories floating around right now about EBANK. The most common one claims that EBANK had 8.9 Trillion ISK in deposits or that the Chairman committed the theft. Ricdic was the CEO, not the Chairman and at most, we've had 2.5 Trillion in deposits. Also, the Bank run has ended for the most part and we have not been forced to tap other lines of capital infusions. We are very well capitalized at the moment and withdraws are being processed within our 48 hour SLA.

Please see the thread linked in this news article and also; please read all of our statistics. We have numbers for pretty much everything; the most common mistake many people make is not reading all the numbers and interpreting them incorrectly.
EBANK

I posted a NYT "article" about this a couple of weeks ago, if anyone's interested.

[VegasCowboy]

Will they get a TARP injection denominated in interstellar credits?

I’m sorry, is this a real story? What should panic me more...this, or the coming swine flu pandemic? I’m getting a headache trying to prioritize my panic-attacks as prescribed by “Business Insider.”

[1rudeboy]

The IRS is already angling to tax these online transactions, and the largest heist in EVE supposedly netted the equivalent of $15K (US).

It's a fascinating area of the law . . . really cutting-edge stuff (I don't mean that in a bad way).

With regard to TARP, it won't happen. EVE (the game) does not have a central authority (or a lender of last resort, or a FDIC), so most people who deposit funds in EBANK understand that it's a crapshoot.

[VegasCowboy]

I was joking ont the TARP, btw.

I guess I don’t really get EVE, nor how these “deposits” translate into real dollars. I assumed based on the excerpt that these were like the credits you earn for participating in various games/activities. I then assumed someone stole these credits and sold them for real dollars, kind of like someone creating a character in an on-line game and selling it.

Did someone actually lose money here, or did they effectively just lose points in a game?

[1rudeboy]

That’s what makes things interesting. The simple answer to your question is that only virtual currency was lost, so no “money” was lost. However, since the virtual currency has a real monetary value . . . .

[Jonah Johansen]

Here is how the virtual money > real money conversion works.

It costs $15 a month to play.

I can buy a 1 month game card using $15 real money from the company or a retailer. There is a code on the card.

I then load the game and go pull up the market and offer to sell that card/code for a set amount of in game money ISK(Inter Steller Kredits) going rate aroun 350 mil ISK per 1 month game card also known as plexes. I thus have been able to buy 350 million in game currency for $15 out of game currency

or the reverse I can take the ISK I make playing the game and buy a game card on the in game market, and thus for 350 mil in game currency I can buy a game card with a real owrld value of $15 which I can use myself thus playing for free or sell it to someone else for real world money

What is a bit different about EVE’s managements policies is not only do they not discourage people from converting in game virtual money for game cards that have a real world value, they actually have set up a mechanism which makes it secure to do so.