If you actually look at the article the very first code sample shows how certain customers (Alameda) are directly exempt from auto liquidation & can carry negative balances at FTX.
Certain customers (including Alameda) - I understang other customers had similar arrangements, and why wouldnt they? Every account was trading on margin and high leverage - the reason you auto liquidate is so they dont run off owing you money.
Is it fraud for a company to extend credit to another company? Any company that issues a invoice and allows say 14 days to settle is extending credit to the other party.