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I have a lot of sympathy (or maybe pity) for SBF. "Stole client funds" appears to have solidified as a meme much the same way "crossed state lines" had in the Rittenhouse case.
I think it's hard for people, including technologists who haven't worked as quants, to appreciate the level of technology risk that's present in quant trading. In most of tech your biggest risk is having all of your data destroyed, and you can address that with well worn improvements in backups. You also risk being hacked but those breaches tend to be embarrassing rather than company ending. Even Sony, which was pwned as hard as you could possibly be pwned, ultimately recovered. But an additional risk in quant trading is accidentally and irrecoverably giving all of your assets away in a few seconds.
Even companies that are following all of the rules and have the right number of members of the professional management class in their ranks can destroy themselves in a matter of minutes. Knight Capital Group destroyed itself in 30 minutes by (with some creative license) failing to follow heroic practices around retiring old flags in protobufs.
Alameda/FTX had a culture that resembled "move fast and break things". They grew extremely quickly. I'm highly skeptical they were able to stand up robust accounting and practices to mitigate technology risks in so short a time.
When SBF says he didn't realize they were leveraged due to accounting error, I believe him. It's not like you can just install the QuickBooks Enterprise Crypto Derivatives Exchange plugin. All of this stuff was bespoke, and in a hurry.
When you thought you had $30b in assets and minimal liabilities, you can spend a billion or two on indulgences, charitable giving and campaign contributions. Your can say confidently you're not investing client funds. If those assets are suddenly marked down 90% you look like a fraud and you're in deep shit.
That's the nature of the business and he knew the risks. But probably in hindsight I'm sure he wishes he had been even more careful.
This isn't to say that I believe he definitely didn't commit fraud. Rather this is me saying that as someone who has pushed code that I thought accidentally gave away $10 million of my employer's money (the gigantic exhale of relief came when we learned I failed to scale by 1000x in the reporting and not the ordering), I am defaulting to blaming it on stupidity before malice.
I think the part that makes people read this more as "stole client funds" is the extravagant spending SBF was doing even while his firm was on the brink of collapse.
The ways to read this do not preclude that he was simply mistaken, but given that a lot of that spending seemed geared towards creating a friendly political and public relations environment to operate in, it sure looks premeditated on some level.
Oh right, there's the part where he presented himself as the "regulator-friendly" face of crypto exchanges vs. the much more libertarianish and Gov-skeptical Coinbase and Kraken.
And finally the reports coming out from the New CEO are giving me the picture that things were so horribly bad over there that it was either EXTREME amounts of negligence, or perhaps an intentional effort to keep the situation so obfuscated and insecure that malsfeasance
A) Would be harder to detect, and
B) Would surely look like negligence.
https://apnews.com/article/ftx-trading-former-ceo-d2c2b881dc0eb0ec37b454674f446b52
Which is ironic if he was supposed to be the one welcoming tighter regulation.
To me, there's a plausible hypothesis that sometime this year SBF became aware of how screwed they actually were, and whilst attempting to keep the house of cards from collapsing and attract new money he was also laying the groundwork to personally escape the worst consequences by acquiring political allies, getting PR puff pieces published, and getting deeply engrained in charitable giving via the EA community, so that he wouldn't look like your stereotypical corrupt exec.
Alas the full crypto-winter made things collapse faster than expected.
Why is this plausible? Because he admits to being openly misleading on at least some levels:
Here's an interview where he's called out his previous claims about being excellent at managing risk:
https://twitter.com/Ringalls86/status/1598327159055159301
Well, what happened?
As the CEO, the buck should stop with him, regardless. I don't care much whether it was ignorance, inexperience, or greedy overindulgence that led to the outcome. Either we establish actual skin in the game for people entrusted with others' money, or we have yet another institution failing to protect the average person from the misbehavior of 'elites' and 'experts.'
From what I'm piecing together from online articles he was cosying up to regulators for (1) moving to a softer regulatory body (the CFTC not the SEC) and (2) as moves in his fight with Binance, which wasn't regulated. If that worked, then Binance either had to get regulated (so losing an advantage) or stay out (and get a reputation as untrustworthy and unsafe).
Binance really pulled a reverse uno trap card move on him if that was the case.
I don't know if Binance is on the level (it seems to be a bit sketchy itself and to have avoided a similar crash by the skin of its teeth) but you have to admit, Changpeng Zhao played a blinder in his on-off fight with Bankman-Fried. First he extended the olive branch and then pulled the rug out from under Bankman-Fried just as hope of a rescue seemed within grasp, including turning off any other potential rescuers with "Sorry Sam, after taking a look at it the entire mess is too terrible for us to take on, see ya!" Truly, revenge is a dish best served cold!
I don't know. The FTT collapse seemed preordained once the Coindesk article was published, even if CZ was the catalyst that toppled the house of cards. And I think pulling out of an acquisition was inevitable for the same reason that SBF's attempts to "fundraise" after the FTT crash were doomed: their balance sheet is a black hole, and no acquirer on earth with the resources to bail out their customers would come to any other conclusion after even a cursory look. SBF's whole "well played, CZ, you won" shtick looks delusional in hindsight.
If anything, CZ probably wishes that he had just quietly sold as much of the Binance FTT holdings as he could after the Coindesk article landed. The outcome would be the same, but he wouldn't feature in the headlines, and they'd have probably recovered at least $100M or so in the sale.
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