When FTX collapsed in November 2022, roughly nine billion dollars of customer money that should have been sitting in the exchange was gone. Working out where it went fell to Peter Easton, an accounting professor at the University of Notre Dame, whom prosecutors called as an expert witness at the trial of FTX's founder, Sam Bankman-Fried. Easton's testimony did something the exchange's own records never had. It followed the money.
Customers had deposited funds on FTX believing those funds stayed theirs, held by the exchange the way a bank holds a balance. Easton showed that the deposits had been pulled into a web of other uses and spent.
Where the deposits went
Easton traced customer money into places that had nothing to do with running an exchange. Some was reinvested in other businesses and in real estate. Other portions went to political donations and to charities. The money in every case belonged to users who had no idea their deposits were funding property deals or campaign contributions, and who had not agreed to any of it.
The numbers marked the timeline. Customer balances peaked at $11.3 billion in June 2022, while FTX's bank accounts held only $2.3 billion. Easton's analysis put the start of the shortfall well before the collapse: customer funds began losing their backing as far back as March 2021. The gap had been growing quietly for more than a year before anyone outside knew.
The founder's account, against the ledger
In November 2022, in an interview with ABC's George Stephanopoulos, Bankman-Fried said he had not knowingly misused customer money and was not aware of what was happening. Easton's reconstruction pointed the other way. He identified specific transactions that could only have run on customer funds and that connected back to Bankman-Fried, which made the claim of ignorance hard to sustain.
Other witnesses filled in the human side. Nishad Singh, FTX's head of engineering, testified that he felt betrayed and admitted his own part in the wrongdoing. Testimony from a former Alameda Research employee laid out roughly $133 million in political donations tied to Bankman-Fried, including a ten-million-dollar gift to his father. Money also turned up in outside funds, one of which, Modulo Capital, returned $404 million to FTX in March 2023 on the view that it had been transferred improperly.
Why the accounting mattered so much
The striking part of the FTX story is how ordinary the detective work was. There was no cryptography to break. The customer money had moved through bank accounts and corporate entities, and a forensic accountant who knew how to read them could reconstruct the path. Bankman-Fried was convicted on all counts in November 2023.
The obvious question is why that work happened only after the failure. On a functioning exchange, customer deposits and company funds are kept separate, and someone checks that the separation holds. FTX had no real line between the two, and no independent party watching it. The accounting that unwound the fraud in a courtroom could have caught it years earlier if anyone had been allowed to do it while the money was still there.
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What it means for your matter
Most engagements are not Enron. But the pattern is the same at every scale: a diverted vendor payment, a related party that shouldn't exist, revenue booked before it was earned, a reserve fund that never quite reconciles. The methods used to expose a multibillion-dollar fraud are the same methods that expose a bookkeeper skimming from a small business or a managing agent taking kickbacks from a co-op.
If something in your financial picture doesn't add up, the earlier a forensic accountant looks, the more of the trail survives. Documents get lost, memories fade, and money moves. The record is easiest to reconstruct while it is still fresh.
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