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]
If you think SBF didn't know that AR was "borrowing" client monies until after all such borrowing was done, we're going to have to agree to disagree on that.
As to the other part: SBF's conduct happened, in relevant part, in the Southern District of New York (and other conduct happened with a sufficient nexus to SDNY to establish venue there). US law, not English law, governs as to whether various representations targeted at the United States (or with a sufficient nexus to the US) create a relationship of trust that gives rise to the possibility of criminal misappropriation. Also, even if the ToS were a defense as to anyone who had signed it, the alleged false statements also reached many potential customers -- say, everyone who watched the Super Bowl. The offense would be complete at that moment; no contract that FTX and a new customer might subsequently sign would change the illegality of those statements.
If SBF thinks Judge Kaplan misinterpreted US law, he can take that up with the United States Court of Appeals for the Second Circuit (and likely will). Interpretation of law being a question for the court is pretty well-established.
Also, I don't see how the terms of service are even relevant to claims about fraud against investors/lenders. That's ~$3B on those counts alone.