Matt Levine seems to think it was the leveraged derivatives. I will quote him at length:

One question that might be too early to answer is: Why was there a liquidity crunch in the first place? A crypto exchange is a weird sort of business, in many ways more like a brokerage than a traditional exchange. The simplest way to run the business is to take deposits from customers, buy crypto for the customers, keep everything segregated, and make money on commissions. Coinbase Global Inc.’s balance sheets are public, and pretty simple: It has about $101 billion of customer cash and crypto assets, and about $101 billion of offsetting customer liabilities. If the customers asked for their $101 billion back, presumably Coinbase would just give it to them.

A more complicated way to do it is to provide leverage to customers: Instead of taking $100 of customer cash to buy $100 worth of Bitcoin, you take $100 of customer cash to buy $200 worth of Bitcoin. A lot of FTX’s business is in perpetual futures, a leveraged product, sometimes levered 20 to 1. If you are an exchange and you are in this sort of business, you will need to come up with the extra $100 to lend to your customer. Presumably that doesn’t come from your equity: You are doing some sort of borrowing, perhaps from other customers, perhaps from outside financing sources, perhaps from your affiliated hedge fund, etc. You will have some customers who owe you money, and others whom you owe money. You will be like a bank. If everyone to whom you owe money demands their money back at once, you will need to get the money back from the ones who owe you money, which might be hard. (You might not have a contractual right to demand the money back right away, or it might be rude and bad for business, or you might have to liquidate them to get the money back and that would blow up the value of your collateral.) In broad strokes this is a reasonable description of what happened to Bear Stearns, a brokerage that financed its customers’ positions. If you are a crypto exchange that provides leverage, then you are probably bank-like enough for a run on the bank.

Another complicated way to do it is that you take your customers’ assets and go invest them in whatever sounds good to you. You’re holding Solana tokens for a customer, you invest them in some yield-farming thing to make some extra cash, if the customer asks for the tokens back you don’t have them, etc. This is more or less what brought down the Celsiuses and Voyagers and BlockFis of the world, but I would not have expected it from FTX. “FTX has enough to cover all client holdings,” Bankman-Fried tweeted yesterday. “We don’t invest client assets (even in treasuries).”

What you said is valid in general. As a reply/rebuttal, I think your focus/association with "lying" is misdirected or stilted.

Basically, what probably happened to FTX is something like the financial engineering described in this link in this top level post: https://dirtybubblemedia.substack.com/p/is-alameda-research-insolvent. This take, which is quite hostile, doesn't involve lying per se.

It's extremely difficult to communicate how normalized something like the above has become, and how much of the "tech" and business success in the 2010s was the result of similar financial engineering and loose capital. 

Succeeding in this way, while not lying, is not exactly honest either. But in this moral space, I strongly put all of my support behind SBF and his decisions as a person, based on his choices and goals.

Before ending today's weird sojourn into corporate finance, I want to point out it's really disappointing how this has been discussed. I don't think the modesty and general intuition most people have expressed is very good, the quality of the modal post wasn't very good (for its first ~10 revisions), and clearly voted up because of who the authors are; clueful, fair comments are shouted down, while EA leaders making making similar appeals to authority/applause lines  are voted up. 

It's wild you are at 30/23 here. 

It's not just that most people don't understand, they are wildly brandishing their opinions and producing a weird ignorant cloud—it's hard to explain, but maybe this person might understand.

Zooming out, I think this is important because basically, it's possible EA is worse off, A LOT worse off,  by having a billionaire come in and flame out like this, than not being there at all.

I guess there's several issues that need to be dealt with. But the one issue that I think is important and hard to handle well, is the perceptions of competency and spirit of EA.

Throwing off someone because they had a business failure, or pointing out their conduct disproportionately, because they are on the "way down", is at least as bad as sucking up to them and ignoring it on the way up, and to me, plausibly way worse.

So it's good to see SBF for who he is, and the work he did  and decisions are quite likely entirely valid. That is why I wrote my parent comment and the first paragraphs of this comment.