[JohnnyB]

I am not familiar with this case, but:
1. An exchange never putting money into bitcoin doesn't seem plausible, as the way exchanges work is based on records of transfers on the blockchain network. That network is not controlled by the exchange and is much larger than the exchange. Falsifying that seems very unlikely.
2. If there were real transfers on the blockchain then there are records of all of those in the public ledger. The public ledger is just that: the record of all movements, and nothing is valid unless it's in that ledger. There is no moving money outside of that ledger.

Basically, based only on knowledge of how blockchains actually work, fraud as suggested in this case by afc seems not possible. I generally agree that where there is a will and a way with a large incentive that cheating is the likely outcome, but the suggested ways in this case don't seem plausible. Without knowing more, I'd say Occam's razor would suggest the simpler explanation is just poor management of the cold wallet. The notion of running a functioning exchange where thousands of bitcoins are never actually even on the blockchain seems much more like fantasy than the alternative.

Do you really understand how blockchains work afc? If so, please explain how that would actually work.