How can everyone stake at 400% per year?  It's easy... that's the way the algorithm is setup to do so.  You have to remember, they are not giving you USD... but paycoins.  So they aren't giving you real money, just fake internet money that could be exchanged for USD or BTC at whatever the rate is for that moment.

It's their belief that the value of this exchange should be kept from tanking due to their cash reserve, where they can buy all the dumped coins at $20 to keep the value stable.

Where does all the cash come from?  It came from the customers themselves!  People buying hashlets directly, their 10% cut of market sales, hashstaker sales, etc.