March 17, 2008 by Nobody Fugazi
Posted in
In discussion regarding what someone who lost approximately $15,000 US Dollars in LukeConnell Vandeverre's last tizzy-fit, the question was 'what can be done?'
Short of a lawyer, it was hard to say. But in pulling up some links on an interesting precedent that could be reciprocal in Australia ([w:Dow Jones & Co. Inc. v Gutnick]) and the Reuters article, Australia says virtual income taxable - report, it dawned on me that the whole conversion of WSE Live from Linden dollars to the WIC might just be a plain and simple attempt to dodge the Australian Tax Office. While I don't know what everyone's favorite agent of delistment, LukeConnell 'WTF' Vandeverre, does about his Australian taxes - I do know that Reuters reported that the Australian government saw the Linden dollar as taxable:
...“The real world value of a transaction may form part of your taxable income, even if it is in Linden dollars,” a spokeswoman for the Australian Tax Office told the paper. “If you are getting a monetary benefit then it’s not treated any differently - normal rules apply.”...
Sounds pretty clearcut in Australia. If you're getting monetary benefit...
And as for the [w:Dow Jones & Co. Inc. v Gutnick] case - Australia decided that a case could be tried in Australia as the damage that Gutnick allegedly incurred happened in Australia. So if you pay money in... oh... Switzerland and lost that money due to someone making the rules up as they fumbled along pettily, maybe Australia would rule that the case could be tried in Switzerland? I'm no lawyer, but if it's good enough for Australia...
Or maybe the Australian Tax Office might get bored and decide to poke around. Maybe they already did. I dunno.
Probably one for VirtuallyBlind.com to mull over with some Australian counterparts. I just come across a lot of this stuff because of my involvement in Internet Governance, or whatever they call it tomorrow...
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Not sure if any of this helps
Investors are also encouraged to report suspicious Internet offerings (or other suspicious offerings) via e-mail to enforcement@sec.gov. A user friendly form to assist you in making a report is available at the SEC Home Page www.sec.gov. Investors can also mail a report to the SEC's Enforcement Complaint Center, Mail Stop 8-4, 450 Fifth Street, N.W., Washington, D.C. 20549.
This can be found at the bottom of this page on the SEC website: http://www.sec.gov/litigation/litreleases/lr16700.htm
And this is an article that I found about a internet stock market:
http://www.news.com/2010-1071-281421.html
The Securities and Exchange Commission last June froze Estonian bank accounts worth at least $2.7 million. The agency said at the time that a fantasy Internet market called StockGeneration, based on the Caribbean island of Dominica, was defrauding thousands of naive investors.
Thanks.
I'll look into StockGeneration...
Second Life Consultant
Very interesting
I've complained in the past when people have made fragmented legal arguments, so you won't get that from me. Consider me refreshed that you didn't do it either.
One of the questions I've been asking myself is whether you can bind users to changes in a terms of service without allowing them to dissolve the interest utilizing said TOS?
For example, I paid Linden $ into the WSE's ATM. I THINK Luke said that by our giving him our Lindens we're transferring the license to him. But I don't think we can transfer the license, just the currency governed by the license. Now those Lindens are being converted to WICS. However, Luke still retains those Lindens. So he's still bound by the "limited license." Does the Limited license of the Linden $ allow for a forced conversion?
Much of the argument provided is "by using the WSE website...." And maybe that will fly (it didn't fly when that land owner sued LL, but that's another issue), but what if I deposited money into my WSE account via Second Life, but only used his website to sign up? Say I was taking advantage of the Our Bank interest rates. Where does the SL TOS end and WSE TOS begin? And how far does "Australian law" fly when the item used to pay into the website was in the United States?
These strike me as important questions. Ones I'm by no means qualified to answer.
In the end I think ATMs will be restricted to the point to require the service itself to exist within the world where the transactions take place. Or in the other words, a website may aid such transaction (such as MetaCard..you can check your balances and all sorts of nifty things, but using the card, paying it off, and so on can all be done inworld) but will not be the replacement for a function within the virtual world. I'm sure there will be exceptions to allow currency exchanges and such to do their thing.
For Luke, who is leaving Second Life, I don't the future of ATMs or SL is relevant so much as actions that took place during the policies at the time. But again, I'm no legal expert. I'm a student. So like a good student I'm going to limit myself to questions and thoughts where my intended vocation is concerned.
Contract of Adhesion.
That phrase is on the lips of anyone who was following whats-his-name's case - Marc something... but does it apply in Australia? I find it difficult to believe that '[w:contract of adhesion]' wouldn't have a synonymous phrase in Australia. But again, I'm not a lawyer and I'm not familiar with Australian Law.
However, the ethics of the matter are highly questionable. And Law, for all its flaws, is supposed to have Ethics as the spirit. Allegedly. :-)
This is something that will have to bypass Linden Lab, I think (and hope). While the 'engine of investment of value' (important phrase, I think) may have been Second Life, it was between residents. One even has to wonder whether Linden Lab didn't pull the Risk API out from under LukeConnell's feet at this point - thus making his ability to exchange Linden dollars null and void.
I recall when Ginko happened that someone had about $25K USD in Ginko that were obfuscated in WSE's handling of Ginko Perpetual Bonds.
I think, at this time, that it is possible that Luke was acting based on what was happening to him at the time. Think about it - if they closed him off to the Risk API, he'd have to convert to WICs. If he was being sued by Midas Commons (unconfirmed rumor), records could have been subpoenaed from the Australian Tax Office, and if he wasn't dealing with taxes properly the ATO may have started poking around too.
So when in doubt, blame the one thing most people don't understand: technology. That argument he gives doesn't stand up to scrutiny.
All of this is speculation, but the scary bit of it is that there is a lot of room for speculation... and the more you actually pry at this, the more potential there is for Luke to have simply gone to the dark side.
For his sake, I hope he's NOT doing any of these things. He's a kid. The realities of this can be very, very, very serious.
Second Life Consultant
Ahh yeah. Marc Bragg. Woebegone.
Funny how I couldn't remember who he was.
Second Life Consultant
Australians call it "Contract of Adhesion" Mate
nt
contracts don't stick in Oz
There's little Australian case law on contracts of adhesion, mainly because the issue has been covered by parliaments in most states and territories with laws along the lines of the Fair Trading Act 1999 Victoria or the Contracts Review Act 1980 New South Wales. Both make interesting reading in the light of South India Shipping.
LukeConnell's real problem in Australian law, apart from the tax commissioner, is the rule in Commonwealth v Verhayen. If you profit from inducing a false belief in a customer the Australian courts will award damages against you.
Whoa!
Commonwealth v Verhayen.
Man. Information just keeps flowing in. And I'm almost done reading Dow Jones vs. Gutnick (really impressive how this was handled).
Second Life Consultant
sailing from Korea to south India via Britain
Unfortunately I was seduced into useless research by your post, and found an article, Jurisdiction and the Internet after Gutnick and Yahoo!, which mentions a case which may be somewhat worrying to both LukeConnell and Linden Lab itself.
The justices in Gutnick did say that while they recognised the case could make Internet transactions more complex in some ways, the correct solution was international legislation along the lines of the Hague Conventions on Child Support. Their honours' call has met with utter silence.
The Hague Conventions require the court issuing an international support order to request the foreign court to enforce the order. Possibly one of my strangest moments ever was finding myself, as a very junior court clerk, telling a somewhat sceptical Sydney magistrate, 'I appear for the County of Los Angeles, Your Worship.'
Dude. Good find.
This one had somehow slipped past me. Thanks for pointing it out!
Second Life Consultant
The WIC would be taxable too
The WIC would be taxable too - if you could buy them _or_ sell them. As a service, or product or license or game-token, then goods-and-services tax applies.
If you can sell tokens to others, then capital gains tax kicks in (same as in the UK, I believe).
I would think it would work that way...
Maybe there is a loophole, or... Luke thinks there is a loophole? I don't know. The data that Luke is putting out certainly doesn't make much sense... and as far as legalities, I know at least one lawyer who has looked at the Terms of Service of WSE and wondered if Luke even knows a lawyer.
I think you're right. I believe you're right. But holding that up over Luke is like tossing SpongeBob into the Red Sea and saying, "make that disappear".
Second Life Consultant