What I don't quite comprehend is how exactly would they lose money on a flash crash? For one, there is no market regulation so what is to stop them from trading or having a proxy trade on the exchange to scoop up coins on the cheap? Also, the parties who are overleveraged will have already paid their fees -- there may be an issue if they cannot liquidate for enough wherein there'd be massive losses, but again, this could be offset by buying coins on the cheap. And finally, wouldn't there be a flood of volume in the race back upwards to a respectable price?

In a nutshell... how would this event not just be a redistribution of wealth as opposed to [much of a] destruction of wealth? Furthermore, if it is a destruction of wealth wouldn't the exchange still make the difference back on increased near-term volume. OR... would people shuffle their newly acquired cheap coins off Bitfinex for fear that it would collapse before they had a chance to use them?