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?
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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.
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