FTX Reportedly Used Random Number to Generate Insurance Fund Volume

The insurance fund balance at FTX was reportedly determined by an arbitrary formula that took into account a specific number and daily trading volume.

Gary Wang, one of the co-founders currently facing bankruptcy proceedings, admitted to this during the trial of his partner, Sam Bankman-Fried.

Wang had previously pleaded guilty and agreed to assist in the investigation. According to Wang, the exchange used a calculation method where the daily turnover was multiplied by ~7500 and then divided by 1 billion to determine the insurance fund growth.

However, the actual balance was lower than the stated amount, as it did not include the available funds.

In court, Wang confirmed that the balance shown on the website was not an accurate representation of the insurance fund’s size.

The purpose of the fund is to ensure that payments can be made and prevent the automatic closure of profitable positions due to mass liquidations.