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News Feed - 2023-10-09 11:10:39

Tom Mitchelhill6 hours agoFTX used Python code to fake its insurance fund figure — Gary WangFTX’s so-called “Backstop Fund” figure was a big lie, according to the crypto exchange’s former chief technology officer.5298 Total views18 Total sharesListen to article 0:00NewsJoin us on social networksCrypto exchange FTX used hidden Python code to misrepresent the value of its insurance fund — a pool of funds meant to prevent user losses during huge liquidation events — according to testimony from FTX co-founder Gary Wang. 


In a damning testimony on Oct. 6, FTX’s former chief technology officer, Gary Wang, said that FTX’s so-called $100 million insurance fund in 2021 was fabricated and never contained any of the exchanges’ FTX tokens (FTT) as claimed.


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.The 5.25 million FTT we put in our insurance fund in 2019 now makes the fund worth over 100 million USDhttps://t.co/tMYgJOAdqI pic.twitter.com/vQDkmkufD2— FTX (@FTX_Official) February 14, 2021


When the prosecution surfaced the above tweet — among other public statements of its value — and asked Wang whether this amount was accurate, he replied with a single word: “No.”“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.”


An exhibit in the Oct. 6 trial shows the alleged code used to generate the size of the so-called “Backstop Fund” or public insurance fund. From yesterday"s exhibits in US v. Sam Bankman-Fried:

The prosecution shows that the "insurance fund" that FTX bragged about was fake, and just calculated by multiplying daily trading volume by a random number around 7500 pic.twitter.com/EDiVPOHODP— Molly White (@molly0xFFF) October 7, 2023


FTX’s insurance fund was designed to protect user losses in case of huge, sudden market movements and its value was often touted on its website and social media.


According to Wang’s testimony, however, the amount contained within the fund was often insufficient to cover these losses.


For example, in 2021, a trader exploited a bug in FTX’s margin system to take an outsized position in MobileCoin, which resulted in a loss of hundreds of millions of dollars for FTX, according to Wang.


When Bankman-Fried realized that the insurance fund had all but been exhausted, Wang said he was told to make Alameda “take on” the loss. This was supposedly an attempt to hide the loss, as Alameda’s balance sheets were more private than FTX’s.


Related:Pro-XRP lawyer John Deaton slams Sam Bankman-Fried sympathizers


In addition to revealing the allegedly fraudulent nature of FTX’s insurance fund, Wang claimed that Bankman-Fried prompted him and Nishad Singh to implement an “allow_negative” balance feature in the code at FTX, which allowed Alameda Research to trade with near-unlimited liquidity on the crypto exchange.


On Oct. 5, Wang — who has already pleaded guilty to all charges pressed against him — 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.


Magazine:How to protect your crypto in a volatile market — Bitcoin OGs and experts weigh in# Fraud# Business# Trial# United States# Court# Sam Bankman-Fried# FTX Token# FTX# RegulationAdd reactionAdd reactionRead moreHow to earn passive income with peer-to-peer lendingExpect new crypto regulations to follow Bitcoin ETFsCrypto VC: Token investing and the next bull run with Digital Wave Finance

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