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It has been revealed that the bankrupt cryptocurrency exchange FTX misrepresented the balance of its public insurance fund, showing random numbers and daily trading volume-based formulas instead of the actual fund amount. Gary Wang, co-founder of FTX, admitted that the actual insurance fund balance is much lower than the amount displayed on the platform’s website.
FTX Founder’s Admission Regarding the Insurance Fund
Another shocking revelation has emerged about FTX, the cryptocurrency exchange that shook the crypto world with its bankruptcy. Gary Wang, co-founder of FTX, confessed that the fund balance displayed on the website does not reflect the reality of the insurance fund held by the bankrupt crypto exchange FTX.
During the ongoing trial of his former business partner Sam Bankman-Fried (SBF), Wang made some important statements, revealing that FTX used a random number (approximately 7,500) obtained by multiplying the daily trading volume of the platform and dividing the result by one billion to determine the amount of cash added to the fund.
The co-founder of FTX emphasized that the displayed number is significantly lower than the actual fund balance held in the insurance fund, indicating that the displayed fund balance does not reflect the reality.
“It Did Not Match the Real Number in the Database”
While giving his statement, Wang confirmed that the displayed number did not match the real number in the database and that the actual insurance fund balance of FTX is much lower than the publicly shown amount. Nicolas Roos, the defense attorney in the lawsuit against SBF, asked, “Does this number have any connection to the real number in the insurance fund?” Wang replied, “No.”
Insurance funds in cryptocurrency exchanges are security funds that protect bankrupt investors from losses and ensure the full payment of profits for winning investors. The main purpose of an insurance fund is to reduce the number of situations where the counterparty is liquidated.