In a recent testimony during the ongoing trial of Sam Bankman-Fried, co-founder of the collapsed crypto exchange, FTX, Gary Wang, another co-founder of the platform, disclosed critical information about the exchange’s insurance fund balance. Wang’s testimony, delivered on the fourth day of the trial, exposed discrepancies between the displayed insurance fund figure and the actual funds held by FTX.
Wang asserted that the insurance fund balance displayed on FTX’s website did not accurately represent the funds available. He explained that the balance was presented solely in USD, and notably, the native exchange token FTT was absent from the fund. Furthermore, Wang stated that the displayed balance did not align with the actual data in the exchange’s database. When questioned if the number was indeed fake, Wang responded affirmatively, confirming that it was not an accurate representation of the insurance fund’s actual status.
During his testimony, Wang also shed light on the unconventional method used to calculate the insurance fund balance. He disclosed that a random figure, approximately 7,500, was multiplied by FTX’s daily trade volume. The resulting value, divided by one billion, was then presented as the insurance fund balance on the exchange’s website. An exhibit displayed in court showcased the code allegedly used to generate this balance.
In another revelation, Wang admitted to implementing an “allow_negative” balance feature in the exchange’s code, which allowed Alameda Research, a company closely associated with Sam Bankman-Fried, to make unlimited withdrawals. This feature effectively granted Alameda Research access to near-unlimited liquidity for trading on the crypto exchange.
FTX legal situation
Sam Bankman-Fried, who has been on trial since October 3, faces a total of seven charges, including wire fraud, money laundering, and unauthorized political contributions. The trial is expected to conclude by mid-November. If found guilty on all charges, Bankman-Fried could potentially face a maximum sentence of 110 years in prison.
It’s worth noting that Gary Wang and Sam Bankman-Fried share a longstanding friendship that dates back to their high school days. While Wang played a crucial role in founding FTX, he remained relatively behind the scenes compared to Bankman-Fried, who had a more prominent public profile within the crypto industry.
