Now that SBF has been actually convicted I think it might be good to have a simple explanation here of what he and rest of the EA-affiliated FTX leadership did.
[Edit: Hopefully I haven't accidentally given the impression that I don't think FTX did anything wrong (this question seems to have been downvoted). I absolutely believe they did wrong and committed fraud. I'm just not sure what it is that they did]
This is one of those times where Google has proved surprisingly useless. I see that he's been convicted of several counts of fraud, but the only explanation I've managed to piece together is this:
Alameda held a load of FTT and borrowed from customer deposits held by FTX. People tried to withdraw their deposits after it came out that Alameda held so much FTT, but FTX couldn't pay out because Alameda couldn't give back the customer funds it had borrowed.
I get the impression that Alameda sneakily holding loads of FTT was very bad, but not illegal, is this right? I guess this is bad because the value of FTT is linked to the value of Alameda and vice-versa so it looks like their assets give them more security if something goes wrong than they actually do, although I only just figured that out.
As for Alameda borrowing customer deposits - I don't understand any of this. What were the rules around lending out customer deposits? What made the lending out to Alameda fraudulent? This seems like THE key thing that FTX did wrong and I just can't find a basic explanation of what the crime was.
Would greatly appreciate any clarification!
[Edit 2: could someone who is downvoting briefly mention why they are doing so? I'm a little confused as to why this got such bad reception]
Note that I am quoting the source I identified and summarized, which in turn quotes the trial transcript at page 675. As I noted, the prosecution's statement here is a summary written for the trial judge who heard all the testimony -- whether the memo's use of that quotation was fair in that summary depends on all of Ellison's testimony at trial. In particular, the prosecution's memo was not meant to stand alone as proof beyond a reasonable doubt of SBF's guilt of the charges. That had already been established by the jury's verdict. I don't think "read the trial transcripts" was a helpful answer to Michael's original question which led me to post the comment.
For those of us who are not inclined to spend days reading over the transcripts, I would note that the jury convicted SBF on all counts with only four hours' deliberation, the experienced district court appears to have bought ~0 of the defense's positions at sentencing, and the media coverage does not suggest many (if any) of the journalists and legal analysts who carefully followed the trial bought SBF's protestations of innocence either.
Moreover, in my view what one would have to believe to find SBF innocent here is simply implausible -- e.g., that he was that of the loop about multibillion dollar cash flows that he failed to grasp what should have been obvious from the conversations established by the testimony and documentary evidence, that he honestly believed ~all of the material public statements he made about how FTX operated and Alameda's relationship to it, that he was so misinformed about how much non-customer money FTX had that he could direct Ellison to have Alameda "borrow" billions and billions of it without understanding that much of that was coming from customer funds, etc.
I think all that justifies a strong starting point that everyone else got it right, and it would take a lot of convincing analysis of ~ all of the prosecution's evidence to move the needle on that.