Exchanging bitcoins for other forms of currency brings up some issues regarding chargeback fraud. Specifically, payment methods such as credit cards, and PayPal, can be reversed up to 90 days after the transaction took place. In contrast, bitcoin is a "hard currency", once you spend bitcoins, you cannot get them back by 'pulling' from your side. Thus, when you trade bitcoin for a 'soft' currency like paypal or credit card, you open yourself up to the risk of chargeback after you send bitcoin. The buyer may initiate a chargeback by claiming non-receipt of goods, or if a stolen account was used, the real account owner will initiate the process once he notices a charge he didn't make. As a result, it is strongly recommended to not trade 'soft' currency for 'hard' currency with people you do not know or trust.
History of fraud
The two major exchanges, Bitcoin Market and Mtgox, were hit with a wave of PayPal scams in October 2010, where one or a group of individuals used stolen PayPal accounts to fund their exchange accounts to buy bitcoins. This has caused the freezing of the Mtgox paypal account, and a suspension of new user registration on Bitcoin Market. These freezing of accounts cause liquidity problem for the bitcoin economy as it become much more difficult to exchange dollars into bitcoin. Eventually, solutions like bitcoin-otc arise that take care of these liquidity problem.