In a recent turn of events, the FTX crypto fraud case has taken a dramatic twist as Gary Wang, former Chief Technology Officer (CTO) of FTX, testified before a U.S. federal court, exposing shocking details surrounding the alleged cryptocurrency fraud orchestrated by Sam Bankman Fried (SBF) and his team throughout the exchange’s existence. This revelation has sent shockwaves through the cryptocurrency community and the financial world at large.

Wang, who shares a history with SBF as a classmate at the Massachusetts Institute of Technology (MIT) and co-founder of the now-defunct crypto exchange platform, unveiled a dark secret during his testimony. He claimed that, under orders from Bankman Fried himself, he had manipulated the value of FTX’s insurance fund, which was purportedly designed to safeguard user assets during times of sudden liquidation events.

The value of this insurance fund, which had been publicly displayed on FTX’s website and promoted by the exchange, turned out to be a fabrication. Rather than being based on actual funds, it was generated using Python code that simply inputted random numbers on the front-end. The genuine amount of funds available to cover user losses was substantially lower than what had been advertised, further complicating what is already one of the largest crypto fraud cases in history.

To add to the complexity of the situation, in February 2021, FTX proudly announced that it had accumulated a total counter value of $100 million within its insurance fund. However, Wang’s testimony exposed the falseness of this claim, leaving investors and regulators bewildered.

During the trial, the prosecution probed Wang about the accuracy of the fund’s value. In response, Wang stated, “No. First, there is no FTT in the insurance fund. It is only the USD number. And, two, the number listed here does not match the number in the database.” This shocking admission further implicated SBF and the company’s complicity in this fraudulent scheme.

Wang also provided insights into the code used to generate the size of the so-called “Backstop Fund” or public insurance fund. He explained, “First, line 16 tells what the name of this function is. Line 17, it gets the daily: it gets the total trading volume of the last 24 hours on FTX. Then in line 19, you take that number, multiply it — then you multiply it by a random number that is around 7500 and then you divide the result by a billion. That is a number that is added to the number displayed on the website.” These revelations shed light on the deliberate manipulation of data to deceive investors and regulators alike.

As the investigation unfolds, it becomes increasingly evident that Sam Bankman Fried is facing significant legal jeopardy. He served as the CEO of the company during the period of fraudulent activities and is alleged to be the mastermind behind the falsification of the insurance fund data.

However, it is crucial to note that SBF was not alone in this endeavor. He tasked Gary Wang, along with FTX’s former Director of Engineering, Nishad Singh, and former Alameda Research CEO, Caroline Ellison, with handling the risks associated with the exchange’s financial imbalance in 2021 and 2022. During this period, FTX’s expenses far exceeded its revenues, primarily generated from trading fees.

The manipulation of the insurance fund was just one aspect of the wrongdoing within FTX. During Wang’s testimony, it was revealed that Bankman Fried had ordered the implementation of an “allow_negative” balance function in FTX’s code. This function allowed Alameda Research, the exchange’s sister hedge fund, to withdraw liquidity without any limitations, exposing the exchange to even greater risks.

The story took another unexpected turn when it emerged that in 2021, a trader had exploited a bug in FTX’s margin system, resulting in losses amounting to hundreds of millions of dollars for FTX. In response, SBF instructed Wang to have Alameda assume the losses, as their balance sheets were more private than those of the exchange itself.

Alameda Research played a pivotal role in covering up the financial crimes committed by SBF and his associates, effectively preventing the crypto fraud from coming to light for several years. Wang, Singh, and Ellison, all long-time partners of Bankman Fried, remained complicit until 2022, when they became alarmed by the revelation that Alameda owed $11 billion in customer funds to the exchange.

This intricate web of deception and financial misconduct has sent shockwaves through the cryptocurrency industry and has raised serious questions about the oversight and regulation of digital asset exchanges. As the investigation continues, the cryptocurrency community eagerly awaits justice and accountability for those involved in what could be one of the most significant crypto fraud cases in history.