FTX used Python code to fake its insurance fund figure: Co-founder
The collapsed crypto exchange FTX used hidden Python code to misrepresent the value of its insurance fund, according to court testimony by FTX co-founder, Gary Wang.
image for illustrative purpose
Washington, Oct 9 The collapsed crypto exchange FTX used hidden Python code to misrepresent the value of its insurance fund, according to court testimony by FTX co-founder, Gary Wang.
Sam Bankman-Fried-run FTX claimed in 2021 on Twitter that “the 5.25 million FTT (FTX tokens) we put in our insurance fund in 2019 now makes the fund worth over 100 million USD”.
Now, FTX's former chief technology officer Wang said during his testimony that FTX’s so-called $100 million insurance fund in 2021 was actually fabricated, reports Cointelegraph.
Instead, the figure shown to the public was calculated by multiplying the daily trading volume of the FTX Token by a random number close to 7,500.
“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 said.
FTX's insurance fund was designed to protect user losses in case of huge, sudden market movements.
In addition to revealing the allegedly fraudulent nature of FTX’s insurance fund, Wang claimed that he and Nishad Singh were prompted by Bankman-Fried to implement an “allow_negative” balance feature in the code at FTX.
“It allowed Alameda Research to trade with near-unlimited liquidity on the crypto exchange,” he was quoted as saying.
Wang had admitted to committing wire fraud, commodities fraud and securities fraud with Bankman-Fried, former Alameda Research CEO Caroline Ellison and former-FTX director of engineering, Nishad Singh.
Wang earlier told the court that a tweet sent by Bankman-Fried assuring that the cryptocurrency exchange was "fine" was false.
"FTX was not fine. Assets were not fine, because FTX did not have enough assets for customer withdrawals,” said Wang.
The FTX trial is expected to last six weeks. FTX -- once the world's second-largest cryptocurrency exchange -- filed for bankruptcy in November last year.
Bankman-Fried was arrested in the Bahamas on December 12, 2022 and extradited to the US on December 21.
