But any exchange in such close company with a hedge fund should always be suspected of front-running. There's an inherent conflict of interest between those two entity types. And I would be surprised if Alameda wasn't front-running FTX customers, given both firm's obvious ethical shortcomings.
Indeed -- I knew several professional traders who used FTX. At the time, their consensus was:
1) "Probably Alameda has an unfair latency advantage, because they are the designated market-maker, and owned+operated by the same people who run the exchange." This could be called 'front-running' depending on how you define the term.
2) "However, SBF probably won't steal all our money because he is well-known, extraditable by USA, and would go to prison."
Needless to say, assumption 2) was incorrect.
SBF was a sociopath who would (acdg to sworn testimony of his GF) actually go ahead and toss the coin if the outcome was one side results in the world getting twice as good and the other side causes the world to be destroyed, and he DGAF that he was also making the bet for everyone on the planet.
They didn't count on the fact that this mentality would also mean that in real life, he would also do all kinds of risky crimes, and even go to trial instead of taking a plea deal, because there's a non-zero!! chance he could get away with it.
Bad bets all around
It could be true he's probably a sociopath, but having an edgy philosophical talk with your girlfriend is just that. It could say something about his character but it's nothing more than a fantasy.
Much more damning is stealing all those billions to become rich and famous.
I saw an article that implied that SBF confirmed on the stand his willingness to do the coin-toss, but I couldn't find it to confirm.
Perhaps the biggest evidence is that he went to trial instead of taking a plea deal. At the very least, he put his parents and family through an awful and unnecessary ordeal, just because he thought there was a chance he could convince a jury. But, in reality, it was not even close.
The "pretty sure" caveat is that I cannot offhand recite chapter and verse of all the citations.
You can of course front-run manually, depending on the degree of automation in the systems one is front-running, but front-runners will generally want to automate. And to scale the scheme for a realtime system of FTX's volume, Alameda would certainly want to automate it.
I wasn't following the case closely enough, but did the prosecution have access to Alameda source code, or was it only FTX? As long as Alameda had access to FTX order records, any front-running code would likely have resided in Alameda repositories.
This blog post [0] contains screenshots of git commits that were used as evidence in the trial. It only shows commits to FTX's source code, so I don't know if the prosecution also had access to Alameda's source code.
Given how obviously incriminating those snippets are, I don't think SBF really tried to hide his crimes. I'm not sure then why they would architecture FTX such there are no signs of front-running in their code.
Personally, my guess is that either A) the prosecution found evidence of front-running but thought that the case was air-tight enough already and they didn't want to confuse the jurors or B) Alameda didn't actually do any front-running.
[0]: https://newsletter.mollywhite.net/p/the-fraud-was-in-the-cod...