well written solid information ... I just wish wallets would hold any coin you wish instead of needing to have multiple wallets for different types of coins... I'm still figuring out which wallets to use and apparently the wallets charge fees as well (some ? all ?).
I find it hard to fathom an exchange NOT having your crypto, since it's not 'physical', how can they NOT have it unless THEY spent/moved it elsewhere (hacking not taking into account). Still wrapping my head around these kinds of things.
In theory, they could have sold part of the Crypto that users gave to them. Under the assumption that not everyone that trades there wants to take their crypto out at the same time. All people are doing on Poloniex is trading ledger entries. Until you ask for your crypto to be sent to your wallet that's all it is.
so in short, they would do what fiat banks do with our money as well. Speculate with it and invest it and do all sorts of things that could 'jeopardise' the amount they have / can give back ?