The FTX insurance fund balance was based on a formula that included an arbitrary number and daily trading volume. The co-founder of the platform going through bankruptcy proceedings, Gary Wang, admitted this, writes The Block.
The latter testified at the trial of FTX co-founder Sam Bankman-Fried. Wang previously pleaded guilty to charges related to the collapse of the stock exchange and agreed to assist the investigation.
According to him, to determine the growth of the insurance fund, the exchange multiplied the daily turnover by ~7500 and divided the resulting number by 1 billion. The actual size was lower than the declared figure; it did not take into account the volume of available funds.
Wang confirmed to the prosecutor that the value on the website was not related to the actual size of the insurance fund. The latter is a guarantee of payments, preventing the automatic closure of profitable positions due to mass liquidations.
Let us remind you that on October 3, hearings began in the case of Sam Bankman-Fried. The latter has been charged with seven criminal counts, including conspiracy to commit fraud.
Found an error in the text? Select it and press CTRL+ENTER
ForkLog newsletters: keep your finger on the pulse of the Bitcoin industry!