As I pointed out - “in and of itself” - that is, in it’s very structure.
There is always “fraud potential” in dealing with people or businesses - no matter what currency you’re using.
If you’re keeping gold Krugerrands in a safe in your house, someone can break in and steal them. That not an inherent problem with what a Krugerrand is, but with how you deal with the security of your Krugerrands and keep them safe.
In dealing with exchanges, it would be like dealing with Madoff and investing with him. You may have done that and lost a lot of money in the process. That’s not a problem with US Dollars, but is a problem of dealing with a crook - no matter what currency you use.
I am by no means an expert but I think you may both be right. The examples that lwd provided were either examples of theft or examples of record keeping fraud. As far as the theft goes, Bitcoin are inherently easier to steal than USD. All someone needs to do is to gain access to the unencrypted file and it is gone. However, from what I understand, you don't need to store your Bitcoin files on an exchange. You can store them on your computer or smart phone or wherever you feel is safe. No one can get them until you send them through a transaction. If you deal with shady people they might not deliver the promised product or service but that is the same with USD. As far as the record keeping fraud, they basically hacked into the exchange and changed the database from John having 30 Bitcoins and Richard having 9 Bitcoins to John having 3 Bitcoins and Richard having 36 and then selling them all.
The risk with Bitcoin is not with the technology itself but with the lack of reputable operators and technologically advanced infrastructure to support it. I believe it will come in time though.