Gary Wang Exposes Fabrication of FTX Insurance Fund
During the trial of Sam Bankman-Fried, Gary Wang, co-founder and CTO of FTX, provided a damning testimony revealing that FTX’s $100 million insurance fund for 2021 was a fabrication. This supports the claims made by the cryptocurrency community, who have found evidence of software code used by FTX to manipulate the fund and deceive the public.
BitMex Research Uncovers Fake Insurance Fund
BitMex Research shared a screenshot of FTX’s database code, which shows that a random number generator was used to generate the published insurance fund balance. This further confirms that FTX misrepresented the value of its insurance fund.
Misleading Promotions and Losses
FTX frequently promoted its insurance fund as a safeguard against market losses. However, Wang’s testimony revealed that the fund often failed to cover such losses. In 2021, a trader exploited a bug in FTX’s margin system, resulting in massive losses for the exchange.
The Fabricated Figures
Under questioning, Wang admitted that the insurance fund figure presented on FTX’s platform was inaccurate and completely fabricated. He also revealed that there was no FTT token in the fund; instead, it was represented by a USD figure that did not align with the actual data stored in the database.
Bankman-Fried’s Actions to Conceal Losses
When Bankman-Fried realized that the insurance fund was almost depleted, Wang claimed he was instructed to assign the loss to Alameda, a cryptocurrency hedge fund. This action aimed to conceal the loss as Alameda’s financial statements were more confidential than FTX’s.
The Relationship Between Wang and Bankman-Fried
Wang worked behind the scenes at FTX while Bankman-Fried maintained a public persona. They were both involved in the formation of Alameda Research, with Wang owning 10% and Bankman-Fried owning 90% of the company. Wang also revealed that Bankman-Fried encouraged the addition of a balance feature to the FTX code, allowing Alameda Research to trade with almost infinite liquidity.
Guilty Pleas and Charges
Wang, along with Nishad Singh and Caroline Ellison, pleaded guilty to wire fraud and other criminal offenses. Bankman-Fried faces seven counts, including conspiracy to commit money laundering and wire fraud related to FTX’s operations.
Hot Take: A Shocking Revelation Exposes FTX’s Deception
The testimony provided by Gary Wang during Sam Bankman-Fried’s trial has exposed the fraudulent nature of FTX’s insurance fund. This revelation not only confirms suspicions within the cryptocurrency community but also highlights the lengths FTX went to deceive its users. The use of manipulated software code and fabricated figures raises serious concerns about the integrity and transparency of FTX’s operations. As the trial continues, it remains to be seen what consequences this damning evidence will have on FTX and its co-founders.
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