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Notes -
I'm not very strong at economics, but my understanding of the problem as a naive outsider :
FTX (bizarrely) didn't have possession of much actual bitcoin, and did have liabilities in bitcoin, during the rush. A lot of what they did have were weird (often self-minted) project tokens, or tokens where a lot of the value was, charitably, FTX employees buying high or making offers to buy high.
Weird self-minted project tokens aren't illegal or necessarily even fraudy, but at best they're ultimately like stock in that they operate as a bet that their majority owner will do well: if FTX's business case didn't work well, the coins would not have transaction volume or value, and if FTX's business case worked fine but their financials failed at a large enough scale it would eventually liquidate enough of each token to plummet their value. Similarly, the more that other tokens were dependent on FTX purchases to weather drops in value, the less dollar value they'd have if FTX folded (or even if it had 'merely' tourniquet them).
On its own, those bluffs aren't necessarily clearly bad decisions. If you have a lot of paper value that's probably worthless and you do nothing with it, you're fine. But both FTX and Alameda were hemorrhaging money, and selling a lot of this probably-worthless paper to other people in exchange for more valuable paper, or using it to justify loans. It's not just that it was in the red, but that FTX was spending like it wasn't in the red. The more and more your business case depends on the chance that many or most of these tokens have, if not as meteoric a rise as bitcoin, at least have a stellar result, that's not (necessarily) illegal, but it's a really dumb idea. The more and more your reserve fund depends on selling things no one's buying, the more it goes from really dumb to hilariously bad.
And that's the best-case scenario -- not that Alameda's bad bets were intentional ways for FTX to pump its sales side, no one explicitly calls anything embezzlement in e-mails, so on. There's some fun philosophical questions about whether this is 'really' criminal intent or just so hopped up on adderall that they don't know the difference between right and wrong, or honestly believed that just the next day every coin he owned was going to take off in a way that would grow them massively. For the purposes of fraud, though, he said he was going to do one thing and did another. For the purposes of business decisions, it doesn't really matter what he thought, or what some random person hearing about Magic Boxes thought.
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