
The FTX co-founder Gary Wang said the exchange's insurance fund balance differed from the actual funds held by the exchange.
Crypto exchanges frequently use insurance funds as a safeguard against possible financial setbacks. While the market turbulence has experienced significant market fluctuations, such funds are vital in ensuring that users' successful trades remain uninterrupted.
''It is a fake number,'' the prosecution asked.
As he described it, he said, a random number, roughly 7,500, was multiplied by the exchange's daily trade volume.
The result, once divided into one billion, was then shown on FTX's website as the insurance fund balance.
An exhibit was presented to the audience, showing the alleged code used to generate the size of the public insurance fund.
However, Wang also admitted that Alameda could make unlimited withdrawals by implementing an 'allow_negative' balance feature in the code at FTX, which allowed Alameda Research to trade with near-unlimited liquidity on the crypto exchange.
Bankman-Fried's lawyers did not immediately respond to Decrypt's request for comment.
On Thursday, Wang pleaded guilty and has chosen to cooperate with the investigators, claiming Bankman-Fried, along with other close associates, had engaged in wire fraud.
The friendship between Wang and Bankman-Fried blossoms, tracing back to their high school days. Although Wang was instrumental in founding FTX, he remained relatively behind the scenes compared to the more prominent Bankman-Fried.
The Bankman-Fried trial is expected to wrap up by mid-November. Sam Bankman-Fried faces seven charges, including wire fraud and money laundering, including unauthorized political contributions.
Bankman-Fried faces a maximum sentence of up to 110 years in prison if he is found guilty.