Gary Wang explained how the FTX exchange used special Python code to show misleading insurance figures to FTX customers
FTX is a notorious crypto exchange that went bankrupt last November. Sam Bankman-Fried (SBF) and Gary Wang founded this exchange in mid-2019 and became the second highest ranked crypto exchange in a few years using high-quality promotional strategies, but seriously collapsed when FTX customers started withdrawing funds from the scholarship. platform following a report from the Coindesk media about the actual financial health of the company.
On October 6, 2023, Gary Wang, co-founder and former chief technology officer of FTX, said during the FTX crypto fraud trial that FTX’s so-called $100 million insurance fund was indeed fake.
According to Wang, the FTX exchange used Python code to display the misleading insurance figures. Using a special code, FTX showed only the 24-hour FTX token (FTT), the native token of the FTX exchange.
At that time, the FTX team shared the status link of the insurance fund and tried to show that the insurance fund was backed by FTX tokens.
Gary revealed that there was no FTT token behind the FTX insurance fund. Basically, the whole thing was only visible via a special code and there was nothing.
“Firstly, there is no FTT in the insurance fund. It’s just the USD number. And secondly, the number stated here does not match what was in the database.” Wang said.
At the time, FTX mentioned this amount and this view on insurance on its official website and stated that it would use the money to help the customers in situations of high volatility or any other type of loss to the customers.
This lawsuit helped conclude that the $100 million FTX insurance fund was not enough to protect customers and that there was also zero dollars behind the reserve fund.
Wang also explained an incident from 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 it did not have sufficient resources to make up for this loss, it added the loss to the balance sheet of FTX’s sister company Alameda Research to hide the problems.
Also read: Hacker finally returns stolen money to crypto exchange HTX (Huobi).