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.
That's not a slight difference, that's a fundamental difference. Lacking a promise of a positive return and lacking a fake investment opportunity, no fraud can be classified as a Ponzi; it's simply fraud or theft. There's absolutely nothing Ponzi like about this Gox situation; nothing. Ponzi's require both of those elements, they are the definition of what a Ponzi is.
From Google:
Ponzi Scheme: a form of fraud in which belief in the success of a nonexistent enterprise (the definition) is fostered(i.e. the mechanism) by the payment of quick returns to the first investors from money invested by later investors.
Many valid things use the mechanism of new money paying out earlier investors; that alone is meaningless and not a defining trait of Ponzi's. All insurance also does this. A ponzi is literally "a form of fraud carried out by the belief in the success of a nonexistent enterprise"; that's it.
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.