Gary Wang explained how the FTX exchange used a special Python code to show misleading insurance figures to the FTX customers
FTX is an infamous crypto exchange that went bankrupt in Nov of last year. Sam Bankman-Fried (SBF) and Gary Wang founded this exchange in mid of 2019 and became the second top-ranked crypto exchange in a couple of years with the help of high level promotional strategies but collapsed badly when FTX customers started withdrawing funds from the platform following a report by the Coindesk media over the company’s actual financial health.
On 6 Oct 2023, During the court trial in the FTX crypto fraud, the FTX co-founder & former chief technology officer, Gary Wang, said that FTX’s so-called $100 million insurance fund was indeed fake.
According to Wang, the FTX exchange used a Python code to show the misleading insurance figures. With the help of a special code, FTX was showing the 24-hour FTX token (FTT), the native token of the FTX exchange, trade volume only.
At the time, the FTX team shared the insurance fund status link and tried to show that the insurance fund was backed by FTX tokens.
Gary disclosed that there was no FTT token behind the FTX insurance fund. In short, the whole thing was only visible through a special code & there was nothing.
“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.
At the time, FTX mentioned this amount & vision of insurance on its official website & stated that it would use the funds to help the customers under high volatility situations or any other type of loss for the customers.
This court trial helped to conclude that the $100 million FTX insurance fund was not sufficient to protect the customers and also there were zero dollars behind the backup fund.
Wang also explained an incident of 2021 when an FTX customer was able to exploit a bug in FTX’s margin system to take an outsized position in MobileCoin. In that situation, FTX faced huge losses and when SBF realized that he had no sufficient funds to recover this loss he added the loss to FTX’s sister firm Alameda Research‘s balance sheet to hide the trouble.
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