Shaun Altman's Blog!

WSE Fraud Compensation Fund?

Posted by Shaun Altman Sat, 20 Oct 2007 22:54:00 GMT

On October 17th, 2007, the World Stock Exchange announced a fraud compensation package for shareholders at the bottom of this public announcement. When I read about the compensation package, I thought it was worthy of both examination and preservation. Lets examine it together. I've also taken the liberty of preserving the portion of this announcement that deals with the compensation package at the bottom of this article, as announcements frequently vanish from the World Stock Exchange announcement system.

Here are the basics of the fraud compensation package:

• A new exchange traded "fund", called WSE Traders Fund (ticker symbol WTF) will be created.
• The "fund" will hold shares of Hope Capital (ticker symbol HCL), the same "company" that owns World Stock Exchange.
• All shares in fraudulent World Stock Exchange companies will be destroyed, and newly created shares of WSE Traders Fund will be given to the shareholders of the fraudulent companies.

We can see from the basics of this fraud compensation package that all of its value will be derived from HCL stock. With this in mind, the most important question to ask about this fund is where will the HCL stock backing it come from? As Ginko Financial has recently announced the failure of its bond, I think we can reasonably assume that the fund's HCL stock will come from the 8,800,000 shares of HCL that were previously owned by Ginko.

As of this writing, the market valued HCL stock at L$0.75 per share, giving the fund a net asset value of around L$6,600,000. This is a pretty depressing amount of value for the fraud compensation fund, given that Ginko's fraud alone has a value of L$200,000,000. That is to say, if Ginko were the ONLY fraudulent company having its shares converted into this fund, each share of the fund would be worth about L$0.04 in theory. Given the very long list of other fraudulent companies that are also scheduled to have their shares converted into shares of this fund, I think that fraud victims can expect an asset value of around L$0.02 per share for the fund.

Don't get me wrong, I'm a big believer in the fact that World Stock Exchange should do what it can to make amends for all of the fraud that it has brought upon the Second Life community. This fund structure, however, begs the question, why even bother? Creating a fund that only compensates the victims for 2% of the fraud that they have endured at World Stock Exchange is nothing more than rubbing salt in the wounds of the victims.

Besides the fact that this fund seems to be an insult to all victims of fraud at World Stock Exchange, offering them only a theoretical 2% compensation for the fraud they have endured, there is an even bigger problem: Perpetual dilution of value! I don't know about you, but I'm not fooled into thinking that fraud at World Stock Exchange is somehow being curbed by a tiny compensation fund that costs the exchange exactly NOTHING each time fraud is committed there.

Since we can take it as a given that the fraud will continue at World Stock Exchange, this means that MILLIONS MORE SHARES of this fund will be created after the commission of each fraud. However, Ginko is the only World Stock Exchange listed security owning any HCL shares to seize and add to the fund. Therefore, as time marches on, the value of an existing share in the fraud compensation fund will DROP dramatically due to the commission of new fraud and thus the creation of new shares in the fraud compensation fund. Would YOU buy shares in such a fund? I sure wouldn't, and I think it is reasonable to assume that nobody with any common sense would.

If World Stock Exchange is serious about compensating the Second Life community for all of the fraud that it has ushered in, it needs to do a lot more than what was announced here. I think that to even show good faith, Connell should contribute his 5 million shares of HCL to this fund, so it has a better starting point. In addition, 90% of all trading commissions collected by World Stock Exchange should be used to buy back shares of this fund via market order, at L$1.00 per share or less, as long as any shares exist for sale at or below L$1.00. This strategy assumes of course that each L$1.00 worth of fraud is worth one share of the fraud compensation fund, as presently seems to be the structure.

I think it is a joke for this guy to get rich off of the trading commissions we pay him to trade what he knows to most likely be fraudulent stocks, and then insult us with a fraud compensation fund that is structured in a manner that not only fails to compensate us for the fraud that we are victims of, but costs him NOTHING. Yep, I think the joke is on us, and Luke Connell is laughing all the way to the bank. The world stock exchange ticker symbol for this fund, WTF, seems highly appropriate to me: What The Fuck?!

If World Stock Exchange wants to posture in press releases about how it is doing something good for their customers, who they state made World Stock Exchange what it is today, and were the victims of fraud at World Stock Exchange in the process, they can SURELY do a lot better than what they've announced in the excerpt below. There seems to be no actual MONEY to be found anywhere in this fraud compensation scheme for the victims. In fact, it seems that all World Stock Exchange is doing here is converting a bunch of fraudulent stocks into a single, unified fraudulent stock, and posturing to the fraud victims about how this is somehow a blessing.

--- Begin WSE Quote ---

- THE KILLER APP OF VIRTUAL FINANCE NOT YET REVEALED BUT COMING SOON....

THE SECRET IS REVEALED! Yes its true, it has always been part of the WSE's agenda to ensure that all WSE Traders whom we class as stakeholders would be indirectly protected as much as possible from the potential ethics based fraud and misconduct that would come from businesses listing on the WSE during the start-up and development phase which has been almost entirely unregulated environment in order to cultivate and encourage growth.

The Secret is out and the time has now come as we feel there is an improved regulatory environment and sufficient information available to WSE traders in order to help them make informed decisions when trading on the WSE.

World Stock Exchange Traders Fund (WTF) is a specially designed fund that holds shares in Hope Capital Ltd on behalf of all WSE account holders who have lost their virtual shares or bonds in delisted companies up to the 19th October 2007. All WSE account holders are stakeholders in the business.

Management alone did not make the WSE what it is today and it is through the participation of our customers that the WSE has become what it is today and what it will become in the future.

WSE account holders will have all their shares in any company that was delisted due to fraud or bankruptcy converted into shares in the World Stock Exchange Traders Fund (WTF).

The WSE Traders Fund will be allocated shares in Hope Capital Ltd on 23rd October 2007 and will begin actively trading on the WSE on the 24th October 2007.

CURRENT CONVERSIONS INCLUDE:
APT 1 - 3
PNK 1 - 1
IBM 1 - 1
MPR 1 - 1
PCL 1 - 1
PPC 1 - 1
RIN 1 - 1
SEX 1 - 1
TSF 1 - 10
WED 1 - 1
TLS 1 - 1
XAN 1 - 1
XDT 1 - 1
SBJ 1 - 1
TGC 1 - 1
PGI 1 - 3
AMD 1 - 0.5
CIG 1 - 1

--- End WSE Quote ---