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- 1 FTX cofounder Gary Wang said that the money held in the insurance fund did not contemplate reality.
- 2 The statement was made in the ongoing trial of Sam Bankman-Fried.
FTX cofounder Gary Wang said that the real insurance fund balance was lower than the amount displayed on the platform’s website. He gave evidence that the exchange used the random number, nearly 7500 multiplied by the platform’s daily volume and then divided by one Billion to decide the amount of cash added to the fund. However, the real amount was different and lower than what was shown on the website.
He also confirmed that the displayed number did not match the real number in the data and the real insurance fund balance was lower than what was shown to the public. The prosecutor, Nicolas Roos questioned whether the number has to do anything with the actual number in the insurance fund. To this, Wang replied “No.”
Gary Wang: Insurance Funds Displayed Were Fabricated
In the October 6 testimony, Gary Wang said that $100 Million in insurance funds in 2021 was not the reality and did not actually contain any FTT, FTX’s native token.
The prosecution argued that the FTX insurance fund amount was fake and was calculated on random numbers. The co-founder added that these numbers of the insurance fund are made to protect user losses in case of sudden activity in the market. These numbers were even approved and shown on the FTX website and social media.
A Python code was used to misprint the value of its insurance fund. Wang added that the pool of funds set aside to deal with unforeseen losses was insufficient. He further added that he was told to make Alameda take on the loss. This was done to hide the loss, as Alameda’s balance sheets were more private than those of FTX.
Insurance funds are protection to pay out profits and cover losses. This avoids instinctive closure of profitable positions caused by widespread counterparty liquidations. Apart from the revelation regarding FTX’s insurance fund, Wang also said that Bankman-Fried reminded that he and Nishad Sing were reminded to allow negative balance features in the code at FTX.
Wang claimed guilty for the charges made against him. He accepted committing wire fraud, commodities, and securities fraud with Bankman-Fried, Caroline Ellison who is former Almeda Research CEO, and Nishad Singh, former FTX director of engineering.
Summary
Gary Wang said that FTX used Python code to generate fake insurance fund numbers. In his testimony, he added that this funds were supposed to protect users from losses. The figures shown to the public are random, generated using a random formula – 7,500 multiplied with daily volume and divided by one Billion.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
