[droffel]

Yup. They were insolvent for a year and a half, and paid out people with pending withdrawals when new people deposited new coins. How people thought it was a good idea to keep using them, I have no idea. There had been warnings about their solvency literally for the past year, starting with permanently "pending" BTC withdrawals, and slowly spreading to not allowing withdrawal of the altcoins on the site.

[dmm]

Just being pedantic here :)

Banks are fractional reserve because at any given time they don't have enough cash to pay demand deposits but that's because they've lent that money out. So while banks don't have cash they do have _assets_ that could be sold or borrowed against to fulfill deposits.

If I have an uninsured, full reserve bank and somebody steals half the deposits I don't become fractional reserve, I become _insolvent_. Just like a fractional reserve bank whose assets drop significantly in value is insolvent.

[droffel]

Thanks for the pedantry, I just updated my comment to indicate that they were insolvent. I definitely used the wrong word there.

[pavel_lishin]

> How people thought it was a good idea to keep using them, I have no idea.

Well, if they had no idea that they were missing all those bitcoins, then the reason is plain ignorance on the depositors' part, and criminality on Cryptsy's part.