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In recent testimony given on October 6th, Gary Wang, the former Chief Technology Officer of FTX, made some damaging revelations regarding the cryptocurrency exchange’s practices. 
According to Wang, FTX used concealed Python code to manipulate the reported value of its insurance fund, which is intended to safeguard users from losses during significant liquidation events. 
Specifically, he asserted that FTX’s claimed $100 million insurance fund in 2021 was actually fictitious and did not contain any FTX tokens (FTT) as it had been publicly stated. 
Rather than being based on actual holdings, the publicly displayed figure was calculated by multiplying the daily trading volume of the FTX Token by a seemingly random number close to 7,500. 
When questioned about the accuracy of this figure, Wang responded with a straightforward “No.” 
He explained that the insurance fund only represented a USD value, devoid of any FTT tokens, and that this value did not match the actual data in the database. 
An exhibit presented during the October 6 trial demonstrated the purported code used to determine the size of FTX’s “Backstop Fund” or public insurance fund. FTX often highlighted the value of this fund on its website and social media as a means of reassuring users in case of sudden market fluctuations. However, according to Wang’s testimony, the fund’s actual size was frequently insufficient to cover substantial losses. 
For instance, according to Cointelegraph, in 2021, a trader was able to exploit a vulnerability in FTX’s margin system to take a disproportionately large position in MobileCoin, leading to a loss of hundreds of millions of dollars for FTX, as per Wang’s account. 
When Sam Bankman-Fried, the founder of FTX, became aware of the depleted insurance fund, Wang alleged that he was instructed to transfer the loss to Alameda Research in an effort to conceal it, as Alameda’s financial records were more private compared to those of FTX. 
Additionally, Wang disclosed that he and Nishad Singh were directed by Bankman-Fried to implement a “allow_negative” balance feature in FTX’s code, allowing Alameda Research to trade with nearly unlimited liquidity on the cryptocurrency exchange. 
On October 5, Wang, who had already pleaded guilty to all charges against him, admitted to participating in wire fraud, commodities fraud, and securities fraud alongside Bankman-Fried, former Alameda Research CEO Caroline Ellison, and former FTX director of engineering Nishad Singh. 
The post <a rel="nofollow" href="https://www.unlock-bc.com/109793/ftxs-fabrication-of-insurance-fund-figures-exposed-by-gary-wangs-testimony/">FTX’s Fabrication of Insurance Fund Figures Exposed by Gary Wang’s Testimony</a> appeared first on <a rel="nofollow" href="https://www.unlock-bc.com">UNLOCK Blockchain</a>.

FTX’s Fabrication of Insurance Fund Figures Exposed by Gary Wang’s Testimony

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