An Interview With the Chairman of JT Financial & SLCapEX, Arbitrage Wise

I was fortunate enough to get to correspond with Arbitrage Wise, who has been fairly busy since Linden Lab's announcement regarding banking in Second Life. You can follow formal announcements from SLCapEX and JT Financial on their website. Questions are welcome in the comments.

Nobody Fugazi: Hi, Arbitrage - I imagine it has been a very busy week for you given the announcement that Linden Lab is getting rid of banks that do not meet their criteria. By the actions of JT Financial, it seems that you are preparing for the worst in as far as the bank and trying to meet the need of the run that Linden Lab started on JT Financial and other banks.

What do you think of this entire situation with banking in Second Life?

Arbitrage Wise: The truth is, I kind of saw this coming, and think that in the long run, it will be good for SL. I really don't have an issue so much with the policy as I do with implementation. There were a lot of better alternatives to going about doing this. We actually provided Echo Linden with access to our backend system so that they can monitor transactions and potential fraud, so they knew how much we had going. They should have also taken this as a sign that we're reaching out to them and are willing to work with them.

If they compared our account reserves to our total deposits, they would have known there was no way we could cover all of the withdrawals in less than 2 weeks. Had they contacted us and discussed things first, we would have been able to tell them that part of our strategy was to bring in almost all of the deposits and discontinue paying interest in May anyways. At least with this alternative, everyone that needed their funds would have been able to access it. Now, we have many customers who did not need the funds took out their money to protect themselves, while others are left without funds to pay their tiers and possibly losing their land.

In this business, if everyone looks out for themselves rather than the collective good, it will inevitably cause the business to fail. Unfortunately, this is now a self-fulfilling prophecy no matter what we do from here on out.

Nobody Fugazi: I have heard that you have tried to see if JT Financial will be able to meet the new criteria for banking by Linden Lab. How did that go, and what comments do you have?

Arbitrage Wise: LL did not accept our LLC as a proper document to continue to operating as a bank, which we had expected. I have also requested that LL extend our deadline to May, and so far, have been denied as well. Unfortunately, it may be too late to stabilize things even if we do get an extension, because many of our customers will continue to withdraw their funds 'just in case'.

Nobody Fugazi: Understandably, many people are alarmed- I spoke with one woman who had bills to pay, but couldn't get to her funds because of measures that were put in place by JT Financial to meet the needs of all the withdrawals. What do you have to say to people about this?

Arbitrage Wise: We have invested over $50,000 USD in various businesses and ventures, many of which have not been completed, and may not happen unless we have a stable financial platform to operate on. The only thing I can do is apologize. There will be no winners in this situation. It's just a matter of how much each of us will lose - we're all in the same sinking boat. I know this may not be what most of us will want to hear, but the only thing I can say is, "This is just part of business, and sometimes, we'll fail because of things that were not the results of our actions. If you've done the best you can, then there's no need to lose sleep because there's nothing more you can do. Don't let what others did trick you into thinking that you did something wrong. Just take your losses, reload, and fire again - more and better opportunities will come . Afterall, there's more important things out there than just money."

Nobody Fugazi: Some people are wondering when they will be able to withdraw via PayPal - still others have not registered on the SLCapEx website prior to the shutting down of the ATMs. Do you have a timeframe for Paypal transactions, and what plans do you have for assisting people who do not have SLCapEx login information?

Arbitrage Wise: I believe our main ATM (can you insert our SLURL here) is still open so that users can go there to get a password for www.slcapex.com. As for withdrawals via Paypal, we just do not have a timeline. Please consider this: In order to get funds into our Paypal account, we must first 1) Liquidate our Investments 2) Move the funds into our Bank Account 3) Move the funds from our Bank Account into Paypal. All of these steps can take anywhere from 3-5 business days each. We have already taken steps to load our Paypal account to pay out about 3M in withdrawals hopefully by the end of next week, but this first round of payments will probably not even last half a day given the long waiting list we have now.

The one thing that we must be careful to not do is liquidate our investments prematurely to satisfy the current withdrawal requests while being unable to meet our long-term obligations - paying everyone back 100%. So it's basically 'pick your poison' - have people upset because they can't get their money now, or have people upset because they can't get all of their money. I rather apologize to people and tell them that I do not have their money now, then to have to tell them later that I do not have their money at all.

Nobody Fugazi: What do you think of the futures of Exchanges within Second Life, including SLCapEx?

Arbitrage Wise: From what I've read so far, it's 50/50 at best - like one of the blogs posted, it "May or May not be affected" by the new policy. At least with the 50/50 chance, we still have time to show LL that we can operate an exchange properly. If a Linden does happen to read this, then let them know that not a single investor has lost money with the SL Capital Exchange since we have taken over. That doesn't mean that we didn't have fraudulent companies or CEOs. But in every case, we have taken the steps to make the investors whole again, even if it meant paying out of our own pockets. And isn't this what it's all about?

Nobody Fugazi: I've been listening in on the Group chat for JT Financial, and it seems that the greatest challenge for JT Financial right now is getting the word to people who don't even seem to know where the SLCapEx website is. What do you think could be done to improve communication on this level within Second Life?

Arbitrage Wise: We have posted signs next to our ATMs, spread the word to everyone to join the JT Financial group for immediate updates, and to read the announcements on www.slcapex.com as well as our daily updates on www.slreports.net. I have posted a daily update on slreports.net on the status of funds since this started, and what we're trying to do to alleviate this crunch. Aside from that, the only way to inform everyone is word of mouth because there's just no other way to communicate throughout the grid.

Nobody Fugazi: Has your faith in the Second Life economy been shaken by this?

Arbitrage Wise: To be frank, no. Like Philip Linden said at the SLCC, we're just at the tip of the iceberg. There will be always be new 'players' coming, with new ideas and new businesses. In the long run, we'll all be better off with this new policy. It's just the short term problems that we must overcome. We'll just have to reorganize our strategy and try to comply. Finding loopholes is not the answer, and whatever LL does do, we'll just comply. My only hope is that our customers do not lose faith in us.

Nobody Fugazi: Is there anything else you would like to share?

Arbitrage Wise: To date, we have not had a single customer lose a single Linden with our bank. We have shown how we earn the interest, we have offered to sign contracts with anyone wanting to protect their money, and have been accessible to every one - there's nothing more we can do. We're not asking anyone for new deposits... all we're asking for is time. We're not short in funds, we're just short on time and liquidity. Yes, some of you may lose your land, but if my past actions show you anything, it will show you that we will do everything we can to make you whole again. It may take us anywhere from 5 months to 1 year to turn this thing around, but we will turn it around.

Nobody Fugazi: Thanks for your time, Arbitrage.