FTX's Terms of Service forbade them from trading with customer funds, but SBF found a loophole to do so anyway

The FTX terms of service has a provision that states:

• "You control the Digital Assets held in your Account. Title to your Digital Assets shall at all times remain with you and shall not transfer to FTX Trading."
• "None of the Digital Assets in your Account are the property of, or shall or may be loaned to, FTX Trading; FTX Trading does not represent or treat Digital Assets in User’s Accounts as belonging to FTX Trading."

It is however common knowledge that SBF and/or management did trade with/use customer funds. After all, if they didn't there would be no way for exchange reserves to fall below the amount of customer deposits short of a hack(the irony).

So while SBF's FTX was debarred from using customer funds, SBF's Alameda Research was not. So SBF and his cohorts simply utilized customer assets likely using freely printed FTT tokens as collateral to borrow these customer deposits to trade on FTX.

What is almost more embarrassing is that there are reports/allegations that Alameda Research used insider trading to gain and advantage over other FTX users as well as somewhat vague allegations the FTX system would supposedly not liquidated Alameda's leveraged positions although this is believable. And yet, Alameda lost $1B of the alleged 'borrowed' customer funds and needed to draw an additional$10B from FTX, yet in spite of these advantages and Alameda ended up in such dire straits that they were forced to file for bankruptcy.

https://decrypt.co/114708/alameda-research-18-tokens-insider-info-ftx

https://www.axios.com/2022/11/12/ftx-terms-service-trading-customer-funds

https://www.reuters.com/technology/ftxs-bankman-fried-begged-rescue-even-he-revealed-huge-holes-firms-books-2022-11-16/