Others mention that it will be visible to other users, but I can be more clear in what that means: At first glance, it seems you could use a negative-balance u

Others mention that it will be visible to other users, but I can be more clear in what that means: At first glance, it seems you could use a negative-balance user to hide fractional reserve. Say the sum of all deposits is 2000. You only have 1000 BTC that you can sign on the exchange. If you were to generate a proof tree for that 2000 and add a branch with -1000 BTC balance at the top of the tree, everyone on the other branch would have to be provided that balance in their chain in order to get to the 1000-valued root. Any of them could clearly see that the balance was being manipulated. So that won't work. If you move the negative-balance hash down the tree, it is still visible to any user who intersects the branch on the way up.