8.2.6 All Digital Assets are held in your Account on the following basis:
(A) Title to your Digital Assets shall at all times remain with you and shall not transfer to FTX Trading. As the owner of Digital Assets in your Account, you shall bear all risk of loss of such Digital Assets. FTX Trading shall have no liability for fluctuations in the fiat currency value of Digital Assets held in your Account.
(B) None of the Digital Assets in your Account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets in User’s Accounts as belonging to FTX Trading.
(C) You control the Digital Assets held in your Account. At any time, subject to outages, downtime, and other applicable policies (including the Terms), you may withdraw your Digital Assets by sending them to a different blockchain address controlled by you or a third party.
I think these rule out “FTX was obliged to honour customer withdrawals (i.e. to repay the debt of fiat currency that it owed), but was not constrained to use fiat currency for any particular purpose in the interim”:
If Alameda borrowed customer deposits from customers (without customer consent, e.g. not via margin lending or staking or whatever), this would be through FTX. Either:
FTX treated the deposits as belonging to FTX Trading, either intentionally, which makes it theft, or unintentionally, and in either case violates (A). Or,
FTX intended to repay, so FTX was treating the deposits like loans to FTX, which makes them loans, violating (B), and then loaned them out to Alameda.
The fact that FTX customers couldn’t withdraw customer funds during/after the collapse means FTX violated its own terms in (C).
(To be clear, this doesn’t imply intent, which is required for fraud.)
I know this is a digression from the main question of intent but I’m still curious about it: Do we know how much money was actually in the margin lending program? How much of the fiat deposits were available for margin lending? Prosecutors said “from June to November 2022, Alameda had taken between 8 and 12 billion, when there was at most 4 billion in the margin lending program” while the defense said “80 percent of the assets on FTX were margined assets used in futures trading. 80 percent are in this margin trading where customers are always borrowing other customers’ assets.”
From the May 13 2022 FTX Terms of Service:
I think these rule out “FTX was obliged to honour customer withdrawals (i.e. to repay the debt of fiat currency that it owed), but was not constrained to use fiat currency for any particular purpose in the interim”:
If Alameda borrowed customer deposits from customers (without customer consent, e.g. not via margin lending or staking or whatever), this would be through FTX. Either:
FTX treated the deposits as belonging to FTX Trading, either intentionally, which makes it theft, or unintentionally, and in either case violates (A). Or,
FTX intended to repay, so FTX was treating the deposits like loans to FTX, which makes them loans, violating (B), and then loaned them out to Alameda.
The fact that FTX customers couldn’t withdraw customer funds during/after the collapse means FTX violated its own terms in (C).
(To be clear, this doesn’t imply intent, which is required for fraud.)
I know this is a digression from the main question of intent but I’m still curious about it: Do we know how much money was actually in the margin lending program? How much of the fiat deposits were available for margin lending? Prosecutors said “from June to November 2022, Alameda had taken between 8 and 12 billion, when there was at most 4 billion in the margin lending program” while the defense said “80 percent of the assets on FTX were margined assets used in futures trading. 80 percent are in this margin trading where customers are always borrowing other customers’ assets.”
I haven’t looked into this, and based on your comment, you seem more informed than me on this issue.