Barbara Fried’s recent post on Substack, to my mind, lays out a devastating critique of the prosecution’s misappropriation theory of criminal liability in the trial of her son, Sam Bankman-Fried. If you think the evidence is open and shut that SBF stole client money, you should think again. Margin accounts like those offered by FTX are very different from traditional (spot) brokerage accounts at, say, Vanguard or Fidelity. As John Donohue and I emphasized in a comment we posted to SSRN: The whole purpose of a margin exchange is to permit customers to finance a portion of their purchases on the exchange with assets borrowed from other customers. FTX’s terms of service authorized such loans with regard to its margin account customers who opted for FTX margin accounts. A substantial majority of the funds deposited on FTX came from customers who opted into the margin trading program. To do so, they had to agree to Section 16.4 of the terms of service, which governed margin traders. The…
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