eli5: How exactly did SBF (allegedly) steal billions of dollars from FTX customer accounts?


Trying to figure out the mechanics of the ‘con’ here. If a customer deposited $100K in FTX to purchase Bitcoin, did FTX actually purchase the Bitcoin and then that Bitcoin was siphoned off by SBF’s trading company Alameda Research? Or did the $100K just go in some kind of slush fund that SBF tapped into when Alameda went into its death spiral?

In: 0

if a customer deposits 100k and buys bitcoin. a couple of things could happen. the exchange could buy bitcoin on the customer’s behalf. or the exchange can “sell” the bitcoin to the customer. so likely in this case, no bitcoin was ever purchased by the exchange (using the customer’s money or not) to give to the customer. but banking statements showed that the custoemr had their money. so FTX was just leading on the customer, while sBF was transfering funds out.

To the best of my knowledge, what happened was that FTX had a clause that they “would not touch any customer deposits”, then carried on touching customer deposits. And the main way they did that was by giving unsecured loans (i.e. just giving free money) to cover the investment losses (poor stock gambling) of Alameda Research.

There’s a lot more details there, including “backdoor” accounts used to siphon off some additional cash straight into their own pockets, which are covered in a thousand YouTube videos if you’re interested, but that’s the gist: they just stole people’s deposits and hid that activity with some duplicitous accounting (involving putting all the money handled into one big pile, to make any particular set of transactions difficult to correlate). It all came out when people came to withdraw and the money was missing.