FTX used random numbers to generate the size of its insurance fund

Quick Take

  • FTX displayed its insurance fund balance using a formula based on random numbers and daily trading volume rather than the actual amount of funds available.
  • Gary Wang, FTX’s cofounder, testified that the real insurance fund balance was lower than the amount displayed on the platform’s website.

The amount of money purportedly held in bankrupt crypto exchange FTX's insurance fund did not reflect reality, according to its co-founder Gary Wang. 

In statements made at the ongoing trial of Wang's former business partner Sam Bankman-Fried, Wang testified that the exchange used a random number — approximately 7,500— multiplied by the platform's daily volume and then divided by one billion to determine the amount of cash added to the fund. But that displayed number was not what was actually being stowed away. 

Wang, while testifying, confirmed that the displayed number did not match the real number in the database, and the real insurance fund balance was, in fact, lower than what was showcased to the public.


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“Does that number have anything to do with the actual number in the insurance fund?” prosecutor Nicolas Roos asked.

Wang responded, "No."

Insurance funds are a safeguard to pay out profits and cover losses, preventing the automatic closure of profitable positions caused by widespread counterparty liquidations. 

Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Frank Chaparro is the Editor At Large at The Block. Chaparro started his career at Business Insider, where he specialized in the intersection of digital assets and Wall Street, market structure, and financial technology. Soon after joining Business Insider out of Fordham University, Chaparro was interviewing top finance and tech executives, including billionaire Mark Cuban, “Flash Boys” star Brad Katsuyama, Cboe Global Markets CEO Ed Tilly, and New York Stock Exchange President Tom Farley. In 2018, he become a sought after reporter in the crypto world, interviewing luminaries such as Tyler Winklevoss, the cofounder of Gemini, Jeremy Allaire, the CEO of Circle, and Fundstrat head Tom Lee. He runs his own podcast The Scoop and writes a biweekly eponymous newsletter. He leads special projects, including The Block's flagship podcast, The Scoop. Prior to The Block, he held roles at Business Insider, NPR, and Nasdaq. For inquiries or tips, email [email protected].


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