Stephanie Roberts knew Second Life was just a computer game, but she couldn't resist the virtual world's promise of a real-world interest rate of more than 40 percent.
The 33-year-old from Chicago, who played the game as a raven-haired vixen called Zania Turner, deposited $140 in Ginko Financial and waited for the money to grow. Instead, it vanished five months ago when Ginko, perhaps the first Ponzi scheme perpetrated by three-dimensional online avatars, left Second Life.
"I was foolish," Roberts said. So were many others. Ginko took with it about $75,000 in real-money deposits, shaking faith in Second Life's venerated lawlessness - no cops, no courts, no government - and unnerving Linden Lab, the usually laid-back San Francisco company that created it.
Last week, Linden Lab banned all virtual banks from the online role-playing game, giving them until yesterday to shut down, fearful Ginko might not be the only one paying crazy rates of return to some people with the deposits of others.
Within moments, there was a meltdown. ATMs didn't work when players rushed to withdraw their Linden dollars, which can be exchanged for U.S. currency at a rate that hovers about 270-to-1. Stocks plunged and so did real estate prices. Avatars - players' digital doppelgangers - marched with signs saying. "Give us our banks back NOW!!" and sent melancholy messages: "We're doomed."
It was nearly a 3-D insurgency. "People are panicking," said Margaret, a British mother of two who in Second Life is Ragged Delec, an exotic dancer. Margaret, who asked that her last name not be printed, hasn't been able to retrieve $400 she had squirreled away.
"This has done some serious damage to the Second Life financial industry," she said.
Such as it was. The Ginko debacle and Linden Lab's response to it are raising questions about the need for regulation over - not to mention the wisdom of - financial transactions in a place that doesn't exist.
"The whole Second Life adventure encourages user freedom, but it's got so many users, and so much money is flowing in, that you have to face that the community needs some degree of control," said Stephan Martinussen, executive director of the global solutions department at Denmark's Saxo Bank, which had toyed with the idea of opening a virtual branch.
Ginko was able to skip town and leave virtually no trail for authorities, if there had been any authorities. Even Linden Lab might not know the identify of the avatar who ran the bank. Company executives declined to be interviewed, but lawyers in contact with unhappy Ginko depositors said they weren't aware of any investigative action taken by the company.
No individual seems to have lost enough money to make filing a lawsuit worthwhile, said Robert Bloomfield, a professor at Cornell University's School of Management who has been following the Ginko case. Because Second Life members live in different countries, "It's not at all clear what jurisdiction you would file suit in," he said.
Real-world regulatory agencies don't monitor multiplayer computer gaming environments such as Second Life. And before last week, Linden Lab had handed down only two other official bans against anything - prohibiting simulations of sexual activity involving minors and gambling.
"It's been this wild, wild West kind of atmosphere," said Benjamin Duranske, a lawyer in Boise, Idaho, who runs Second Life Bar Association and blogs on the virtual world.
"Usually, we don't step in the middle of resident-to-resident conduct," Linden Lab said in last week's statement, which was posted on its blog. "But these 'banks' have brought unique and substantial risks to Second Life, and we feel it's our duty to step in."
Second Life is popular with corporate America - International Business Machines Corp. holds meetings in an outdoor amphitheater on its sprawling virtual campus, members of Best Buy's Geek Squad hang out in a virtual store and visitors to Dell Inc.'s virtual island can build their own computers.
But none of the corporations that have set up shop in Second Life conduct any financial transactions there.
That might be because they're concerned about the unregulated nature of the space. In July, IBM, one of the earliest companies to establish a presence in Second Life, introduced official guidelines to govern how its 5,000 employees interact in the virtual world.
Linden Lab seems to see itself as no more responsible for what goes on in Second Life than an Internet provider such as AOL is for illegal activities discussed over e-mail, said David R. Naylor, an attorney with the British law firm Field Fisher Waterhouse LP, and that attitude crimps Second Life's potential.
There have been some calls for government to step in, but the federal government right now is pretty much scratching its head.
"Most members of Congress don't understand what this is all about," said Dan Miller, a senior economist with the Joint Economic Committee of Congress. "Is a Linden real money? Is it an asset? Is this just a form of barter? Is this a form of capital gains? We just don't know. The courts haven't ruled on this, and the regulatory bodies haven't stepped forward to stake their claim."
Alana Semuels writes for the Los Angeles Times.