When you put funds on an exchange, or stake in a contract, or do anything where crypto assets are no longer in your wallet - it is no longer your crypto. You are then relying on a third party to do something on your behalf.
Exactly. And mostly this is why people should not store their cryptocurrencies on exchanges. If an exchange go broke/bankrupt, then the users lost their funds. Whatever amount they stored on the exchange. And if someone hacks an exchange, then the hacker can steal the funds, and if the hacker do that, then the users also lose their cryptocurrencies, which were stored on the exchange.
Yep, and we've seen it happen many times.
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