Halting withdrawals while still allowing deposits in an attempt to gain enough capital to payout those who were poised to withdraw sounds very ponzi-ish.
The low BTC exchange rates were both indicative of the risk, but also enticing to new exchange customers trying to strike it rich off a sinking ship.
Ponzi schemes are a form of fraud, sure, but the particular kind of fraud under discussion shares the key features of a Ponzi scheme, since its sustainable exactly as long as there is a sufficient net inflow of money from the outside to cover the money being extracted by uncontrollable losses.
The only difference from a traditional Ponzi scheme is that in such a scheme the extraction is to the fraudsters pockets, rather than to the fraudsters incompetence.
> but the particular kind of fraud under discussion shares the key features of a Ponzi scheme
No it doesn't; the key feature of a Ponzi scheme is intentional fraud using a phony investment that doesn't actually exit. That's what a Ponzi scheme is.
Bitcoin has nothing in common with a Ponzi scheme and all you people who keep repeating this non-sense need to go educate yourselves on what a Ponzi scheme actually is.
> No it doesn't; the key feature of a Ponzi scheme is intentional fraud on a phone investment that doesn't actually exit.
Assuming the description of this as being a loss that, however unintended when it first started occurring, was known, concealed, and papered over by using other funds, it was an intentional fraud from that point on a phony investment that doesn't actually exist.
> Bitcoin has nothing in common with a Ponzi scheme
That may be true about Bitcoin, but not about the scenario proposed upthread about what was going on at Mt. Gox. They aren't the same thing.
Again still wrong. Exchanges aren't investments; users aren't promised returns, they in fact expect that the chance of loss is high.
Just because fraud occurs does not a Ponzi make. Seriously, just stop repeating this complete nonsense. Ponzi schemes are very specific things and neither the Gox situation nor Bitcoin are Ponzi's in any way.
> Exchanges aren't investments; users aren't promised returns, they in fact expect that the chance of loss is high.
They expect the chance of trading losses is high, they don't expect that the loss of balances on account is high (in fact, they are generally promised that, except for specified transaction fees, such accounts will retain their value.)
There's a slight difference from what goes on in a traditional Ponzi scheme in that the former promises a positive return which is only met for as long as external funds come in to cover the returns (plus the funds being extracted by the fraudster) where the suggestion about Mt. Gox is that their Bitcoin accounts were promising a zero return, which could only be met for as long as external funds were coming in to cover the BTC being stolen. Which isn't strictly the same thing as a traditional Ponzi scheme, but is a very closely related form of fraud.
Note that I'm not saying this is what happened at Gox -- I have no way of knowing that. But what has been suggested is very much like a Ponzi scheme.
Sufficiently advanced incompetence is indistinguishable from malice.
That is to say, at the end of the day, does it really matter if this happened because Karpeles is an idiot or because Karpeles was malicious? No, the end result is the same, and possessing and wielding that shear amount of idiocy is no more excusable than just being malicious.
There's really one spot where it matters: I think that when we fail to distinguish adequately between idiocy and malice, we begin to fall into the trap of seeing all catastrophes like this as malicious in hindsight, and consequently lull ourselves into assuming that any future catastrophes must also stem from malice.
The end result being, we hinge huge decisions on the question, "Do I think this person might actually try to hurt me?" without giving adequate attention to the question, "Does this person possess sufficient competence to reliably avoid hurting me by accident?"
Not just in finance. The issue seems to come up in health care quite a bit, too. Do you really want someone who doesn't fully grasp the germ theory of disease sticking sharp objects into you after previously having stuck them into someone else? The occasional outbreaks of hepatitis associated with acupuncture suggest this is a question we might want to spend more time thinking about. Instead, we tend to not get past worries (including legitimate ones) about whether or not Big [insert_big_thing_here] is trying to hurt us.