SBF and Alameda

But, but, what did Sam Bankman-Fried actually do wrong?

That FTX lends to Alameda is OK. Yes, this is true of both the margins and of the actual underlying assets. A broker is indeed allowed to lend out client assets for a fee. That’s how everyone short sells stocks after all – the pensions funds, insurers, who hold those on behalf of investors lend them to those who cover a short sale. But FTX’s and Alameda’s joint ownership throws up two problems.

The first, is that a broker – and FTX was a broker as well as an exchange – can lend out pooled funds but not specifically segregated client funds. That second would be like the London Stock Exchange borrowing against all the BP shares on the market to go speculate in the oil price. Not wise and certainly not legal.

The second is that lending to connected companies is very frowned upon – to the extent of not being legal under some circumstances, allowed in a minor way in others. FTX and Alameda were very definitely connected companies. So, lending of assets across the corporate divide should have been minimal or at least well managed.

I’ve the notes for 60,000 words on this, SBF, Alameda, FTT and all. Yea, over and above the varied scraps of other books I have rolling around. Now to see if I can deal with the one thing I’m really good at – procrastination.