These bitcoin servers trusted their currency exchange to cloud servers--VPSes, really--and they want Linode to compensate them for the money lost? Insane. I don't claim to know anything about the bitcoin infrastructure hosted here but I'm going to go out on a limb here and say that there was no dedicated hardware firewall in front of it, no IDS, no WAF, nothing but some Linux instances running iptables.
The payment card industry wouldn't certify this hardware to process credit cards for a mom-and-pop online business, yet these guys use it like their bank? Come again?
PCI-DSS is actually quite easy to get certified in. I would say the issue is Linode not protecting their customers but as you say it's completely optional and would incur higher costs.
So you are saying that you can not use cloud hosting for anything serious? Even if they don't keep cash around, most web apps might lose a lot of value by being hacked. user data stolen, reputation lost and so on. So according to you, the cloud is only for worthless toy projects.
The payment card industry wouldn't certify this hardware to process credit cards for a mom-and-pop online business, yet these guys use it like their bank? Come again?