FTX Co-Founder Gary Wang Admits FTX Insurance Fund Figure Was Fake

Crypto News – Gary Wang, a co-founder of FTX, testified that the company utilized covert Python code to inflate the amount of its insurance fund, a pool of money intended to protect users from losses during significant liquidation events.

FTX Co-Founder Gary Wang Admits FTX Insurance Fund Figure Was Fake

FTX’s supposed $100 million insurance fund in 2021, according to Wang, was fabricated and never contained any of the exchanges’ FTX tokens (FTT), as promised. Wang made this claim in a harsh statement on October 6. Instead, the value shown to the public was calculated by multiplying the FTX token’s daily trading volume by a number that was chosen at random and was close to 7,500.

Wang gave a straightforward “No” in response to the prosecution’s inquiry about whether this amount was accurate after bringing up the aforementioned tweet and other publicly available declarations of its worth.

For one, there is no FTT in the insurance fund. It’s just the USD number. And, two, the number listed here does not match what was in the database.

Wang

Funding Was Insufficient to Cover Losses

The value of FTX’s insurance fund, whose purpose was to guard against user losses in the event of significant, unexpected market changes, was frequently emphasized on the company’s website and social media channels. However, according to Wang’s testimony, the fund’s cash reserves frequently fell short of covering these losses.

For instance, Wang claims that in 2021, a trader used a flaw in FTX’s margin system to take an excessive stake in MobileCoin, causing FTX to lose hundreds of millions of dollars as a result. Wang claims that Bankman-Fried instructed him to have Alameda “take on” the loss when he knew that the insurance fund had almost run out. Given that Alameda’s financial sheets were more personal than FTX’s, this was allegedly an effort to conceal the deficit.