What's not clear to me is what they gambled on that lost money.
Business model ought to be simple, the exchange earns loads of fees, and Alameda makes markets on it, earning spreads.
Just putting a lid on the risk there should be enough to keep people occupied, no need to print your own money for extra leverage.
My guess would be other crypto ventures. All these crypto companies pumped each other with no products/assets (Stadium names and soccer team sponsorships with no products to sell!) and invested in each other. The economy had so much excess money and they got pumped and they thought this is what "investing" is. Economy's bubble burst and suddenly their valuations goes to 0.
When economy goes bad everyone is hurt but these companies had nothing but vaporware and are vaporizing as a result.
Just a guess though.
Swapping whatever cash you have for FTT in order to invest it elsewhere just seems insane. You've got a business that creates cash, and needs it for deposits and margins. I mean sure, split out some into a venture business, but be sensible and keep some for the cash cow?
Also, hire an adult to tell you this. Would have cost barely anything to get any old finance professional to come in and say that.
But I can imagine how it happens. It is some massive fucking bull market and you see your peers doing shady things (20% APR! Zero risk!) and making shit loads of money. You've got this trading arm that is making shit loads of money during the bull market. So you do a little double dipping and it work! Hooray you are making everybody richer! So you do a little more. And a little more. And then oops Alameda is losing a lot of money. But don't worry this is just a blip. Those folks are smart. Hmmm... this is taking longer than we thought to come back. They just need some temporary money to get through this. Don't worry, they've still got huge assets. Oh fuck, their assets are tanking and they are still losing money. Kaboom.
You need to have somebody in the room who can say "yes I know this strategy is making money right now but we absolutely cannot do this." And it is already hard to have that person in the room normally, let alone when you are a company make up of people in their 20s who are told they can do no wrong and also believe that it is their moral duty to make a shit ton of money so they can funnel it into some weird effective altruism mission. If you believe you are saving the world then that 20th billion is still important, whereas if you just want to be rich as fuck then it really isn't.
Also, having listened to the FTX podcast a few times just to get some idea of what their magic was, there was one episode where Caroline came on, and the gist of it seemed to be that the host Tristan and a lot of the heavy blockchain cool-aid drinkers managed to convince Caroline to toss out good old risk management principles and Yolo it on defi and nft projects. They referred it in Their podcast as "the summer of defi". I guess that might have been a reason as well
Alameda has a strong incentive to knowingly do bad trades on ftx, i.e. stale quotes + spreads too small, since it increases legitimate volume numbers and generates ftx fees (gains in ftx fees offset trade loss). It's unknown if this happened or to what extent, but it can be very costly to do this in large size.
Certainly won't catastrophically explode the maker but it doesn't help if you're already hurting somewhere else.