- Expert witness finds FTX’s digital wallets only contained $5 billion during crypto peak, contrary to the believed $20 billion.
- Prof. Peter Easton, an authority in financial statement analysis, confirms the significant discrepancy in FTX’s reported crypto holdings.
Expert Analysis Highlights Massive Gap in FTX’s Holdings
In a riveting revelation during Sam Bankman-Fried’s criminal trial, esteemed Notre Dame Alumni Professor of Accountancy, Peter Easton, shared his findings about the vast discrepancy in FTX’s crypto holdings. During the height of the crypto surge in November 2021, FTX’s customer base was under the impression that they held approximately $20 billion in digital assets. Contrary to these claims, Easton’s comprehensive analysis showed that the exchange’s digital wallets held close to only $5 billion.
Blockchain’s Transparent Data Unmasks Discrepancies
Easton emphasized the value of the “much finer data” available on the blockchain, which made his assessment more reliable than merely tracing the flow of FTX customers’ fiat deposits. His research, initiated at the prosecutors’ request, encompassed an extensive range of resources including bank statements, a vast FTX database, documentation from lenders, and public records from the blockchain.
An especially compelling chart presented in court compared the on-chain balances in FTX’s “sweep” wallets to the customer balances documented in the exchange’s database. Easton elucidated the process of how FTX accounts were credited: each customer had a unique digital wallet address linked to their account, and upon depositing funds, these assets would be moved to another wallet amalgamating customer funds. What was unsettling was Easton’s revelation that since January 2021, FTX’s wallet balances never matched the combined totals reflected in customer accounts, exhibiting a consistent shortfall running into billions.
A week before Bankman-Fried’s crypto dynasty began to falter, the aggregate account balances of FTX customers were reportedly $11.4 billion. Yet, in stark contrast, Easton’s assessment highlighted that the actual crypto in the exchange’s wallets was a little over $1 billion.
Adding another layer to the intrigue, Easton pointed out that it seems to be customer funds that were used by Alameda, a company with 57 accounts on FTX that had the capability to accrue negative balances. To illustrate, in May 2022, the analysis unveiled that Alameda’s accounts had amassed negative balances on FTX to the tune of $12.6 billion.
Bankman-Fried, the former crypto magnate, currently grapples with seven fraud and conspiracy charges stemming from FTX’s collapse last year. The allegations suggest the misuse of billions in cash and crypto from his erstwhile exchange, funneled through Alameda Research for personal expenses. However, he has firmly pleaded not guilty to all accusations.
Drawing parallels from the past, Easton mentioned his previous involvement in deciphering Enron’s financial maze post its infamous 2007 bankruptcy, a company where FTX’s current CEO, John Jay Ray III, had a significant role during its bankruptcy proceedings.