[PaulHoule]

Good question.

The simple answer is that they were doing many transactions internally. If you kept your BTC at FTX, FTX should have put your BTC in their wallet. Even though FTX customers would have been able to trade with each other off-chain, the total amount of BTC at FTX should have been visible.

They must have been playing some kind of shell game that made this kind of auditing ineffective.

[sp332]

Didn't they send a bunch of assets to Alameda? Alameda gambled with the money and lost it. SBF claims he misread the accounts and thought Alameda had put up enough collateral to cover it. But wouldn't that mismatch be publicly visible on the blockchain?