> what does corporate structure complexity have to do with fraud?
Broadly speaking, inexplicable complexity in finance means fraud.
Broadly speaking, inexplicable complexity in finance means fraud.
1. Alameda Research experienced some losses and needed capital injection
2. In a transaction that was probably not at arms-length and possibly fraudulent, they borrowed money from FTX by putting FTT and other tokens as collateral
3. The tokens taken as collateral crashed in value, which caused FTX to be unable to meet their liabilities
So let me get this straight: They were concerned with "actions like #2 exposed", so they set up a super complicated corporate structure, and apparently... didn't make use of it? Once the leaked balance sheet came out on coindesk everybody pretty much immediately figured it out, and not because there was great internet sleuths, it was just that obvious.
They used user funds to cover their losses. There is no possibility where this isn't fraudulent.
Also how did they even lose so much in the first place?
That one's easy, they bought a bunch of tokens that turned out to be worthless. (E.g. allegedly they were buying Luna the whole way down).
It's called being conservative in your statements.
>Also how did they even lose so much in the first place?
Bad investments
>Meanwhile, at a meeting with Alameda employees on Wednesday, Ms. Ellison explained what had caused the collapse, according to a person familiar with the matter. Her voice shaking, she apologized, saying she had let the group down. Over recent months, she said, Alameda had taken out loans and used the money to make venture capital investments, among other expenditures.
>Around the time the crypto market crashed this spring, Ms. Ellison explained, lenders moved to recall those loans, the person familiar with the meeting said. But the funds that Alameda had spent were no longer easily available, so the company used FTX customer funds to make the payments
https://www.nytimes.com/2022/11/14/technology/ftx-sam-bankma...
Were the losses real or were they "diverted" to someone else? This, herein, lies the problem. We as outsiders cannot tell the difference.
Afterall, "Fraud and Stupidity look an awful lot alike" [1] Playing the dope is pretty common con scheme.
[1] https://www.bankinfosecurity.com/fraud-stupidity-look-lot-al...
Market paniced when alameda attempted to buy all remaining FTX from Binance, at $22. Probably because Alameda has loans that would be liquidated under that price.
A Bank run materializes, and the rest is history.