I've been outed as a pianist (if I had gotten to make this joke in real life, the humor would have come from the fact that pianist sounds very much like penis).
...pause for laughter...
I believe that if people deposit to an exchange, they have a contractual and legal right to withdraw from it. If the exchange can't service that with real banking, and is hiding that with shell games on the books enabled by failing to audit Tether as their own "TOS" require, I would say this is close enough to "paying out previous investors (depositors) with new investors (depositors)money" for colloquial ponzification.
However, it's possible that I over-use the term. There is no promise of wild gains here or any attempt to make money off of MLM or referrals. They aren't trying to run a ponzi, I think they are trying to dig their way out of a banking problem and have inadvertently created something very much like a ponzi.
Thanks for keeping me honest.
PS - Bitcoin Cash's superiority is mostly cited as an alternative to get out of BTC, and to point out that BTC's fundamentals relative to price look shaky. If this event actually happens, the smart money will be in FIAT and cleaning up the blood in the streets after.
hehe - the list of jokes about tiny pianists is too long even for this high speed blockchain ;)
I think the absence of any underwriting or government protection means that if the exchange goes bankrupt, you lose your 'money'. So that also infers that if they behave fraudulently and take in more than they can pay back (as most banks do offline) then while technically they owe you the money, you might not ever get it back if they just declare bankruptcy and run off to hide in a very expensive jungle for a few years.
It would likely be simple enough to prove a degree of fraud, just as it is with mainstream banks - but decades after many learned about the fraud of fiat banking - it's still with us... the magical money gift made of imagination that just keeps on giving!
Fractional banking, definitely something that exchanges had better not be messing around with. Sadly it wouldn’t surprise me if there were a few dabbling in it...