In the weeks since Sam Bankman-Fried’s cryptocurrency empire was revealed to be a house of lies, mainstream news organizations and commentators have often failed to give their readers a straightforward assessment of exactly what happened. August institutions including the New York Times and Wall Street Journal have uncovered many key facts about the scandal, but they have also repeatedly seemed to downplay the facts in ways that soft-pedaled Bankman-Fried’s intent and culpability.

David Z. Morris is CoinDesk’s chief insights columnist.

It is now clear that what happened at the FTX crypto exchange and the hedge fund Alameda Research involved a variety of conscious and intentional fraud intended to steal money from both users and investors. That’s why a recent New York Times interview was widely derided for seeming to frame FTX’s collapse as the result of mismanagement rather than malfeasance. A Wall Street Journal article bemoaned the loss of charitable donations from FTX, arguably propping up Bankman-Fried’s strategic philanthropic pose. Vox co-founder Matthew Yglesias, court chronicler of the neoliberal status quo, seemed to whitewash his own entanglements by crediting Bankman-Fried’s money with helping Democrats in the 2020 elections – sidestepping the likelihood that the money was effectively embezzled.

Perhaps most perniciously, many outlets have described what happened to FTX as a “bank run” or a “run on deposits,” while Bankman-Fried has repeatedly insisted the company was simply overleveraged and disorganized. Both of these attempts to frame the fallout obfuscate the core issue: the misuse of customer funds.

Banks can be hit by “bank runs” because they are explicitly in the business of lending customer funds out to generate returns. They can experience a short-term cash crunch if everyone withdraws at the same time, without there being any long-term problem.

But FTX and other crypto exchanges are not banks. They do not (or should not) do bank-style lending, so even a very acute surge of withdrawals should not create a liquidity strain. FTX had specifically promised customers it would never lend out or otherwise use the crypto they entrusted to the exchange.

In reality, the funds were sent to the intimately linked trading firm Alameda Research, where they were, it seems, simply gambled away. This is, in the simplest terms, theft at a nearly unprecedented scale. While the total losses have yet to be quantified, up to one million customers could be impacted, according to a bankruptcy document.

In less than a month, reporting and the bankruptcy process have uncovered a laundry list of further decisions and practices that would constitute financial fraud if FTX had been a U.S. regulated entity – even without any crypto-specific rules at play. Insofar as they enabled the effective theft of the property of American citizens, these ploys may still be litigated in U.S. courts.

The list is very, very long.

The many crimes of Sam Bankman-Fried and FTX

At the heart of Bankman-Fried’s fraud are the deep and (literally) intimate ties between FTX, the exchange that enticed retail speculators, and Alameda Research, a hedge fund that Bankman-Fried co-founded. While an exchange ultimately makes money from transaction fees on assets that belong to users, a hedge fund like Alameda seeks to profit from actively trading or investing funds it controls.

Bankman-Fried himself described FTX and Alameda as being “wholly separate” entities. To reinforce that impression, Bankman-Fried stepped down as CEO of Alameda in 2019. But it has emerged that the two operations remained deeply tied. Not only did executives at Alameda and FTX often work out of the same Bahamian penthouse, but Bankman-Fried and Alameda CEO Caroline Ellison were romantically linked.

Those circumstances likely enabled Bankman-Fried’s cardinal sin. Within days of FTX’s first signs of weakness, it became clear that the exchange had been funneling customer assets to Alameda for use in trading, lending and investing activities. On Nov. 12, Reuters made the stunning report that as much as $10 billion in user funds had been sent from FTX to Alameda. At the time, it was believed that as little as $2 billion of those funds had disappeared after being sent to Alameda. Now the losses appear to have been much higher.

It remains unclear precisely why those funds were sent to Alameda, or when Bankman-Fried first crossed the proverbial Rubicon to betray his depositors’ trust. On-chain analysis has found the bulk of movements from FTX to Alameda took place in late 2021, and bankruptcy filings have revealed that FTX and Alameda lost $3.7 billion in 2021.

This is maybe the most befuddling part of the Bankman-Fried story: His companies lost massive amounts of money before the 2022 crypto bear market even started. They may have been stealing funds long before the blowups of Terra and Three Arrows Capital that mortally wounded so many other leveraged crypto players.

The FTT print and ‘collateralized’ loans

The initial spark that set FTX and Alameda Research on fire was CoinDesk reporting on the portion of Alameda’s balance sheet made up of