The mystery of FTX’s missing $9B is unraveled at SBF trial

A forensic accountant at the trial of Sam Bankman-Fried tried to explain what happened to $9 billion in FTX customer funds that were missing in June 2022, five months before the company filed for bankruptcy.

Peter Easton, an accounting professor at the University of Notre Dame, said Wednesday that $11.3 billion in FTX customer funds were supposed to be held at Alameda Research, but only $2.3 billion were actually in its bank accounts. The funds were ultimately used for a variety of purposes, including investments at Anthony Scaramucci’s SkyBridge Capital and Lily Zhang’s Modulo Capital, he said.

“Customer funds were used in various ways,” including investments, political contributions, charity foundations and real estate purchases, Easton said. He studied Alameda’s bank statements, wire transfers and other documents for the government. 

The testimony backed up prosecutors’ allegations that Bankman-Fried funneled money from customers at his FTX crypto exchange into Alameda, an affiliated hedge fund, for investments, political donations and expensive property before both companies collapsed. The 31-year-old faces decades in prison on a variety of fraud and conspiracy charges at the New York trial.

The tracing, in one instance, shows a large sum of customer funds ended up at Modulo Capital through an investment made by Alameda. In another instance, FTX customer’s crypto assets were used to repay a large portion of a loan Alameda received from Genesis Capital, Easton said. 

SkyBridge didn’t immediately reply to a request for comment. Zhang couldn’t be reached to comment. Modulo Capital reached an agreement in March to return about $404 million to FTX, as part of the exchange’s bankruptcy case.

Easton is one of the last government witnesses as prosecutors start to wrap up their case in the third week of the trial. 

Previous testimony came from three members of Bankman-Fried’s inner circle — Caroline Ellison, Gary Wang and Nishad Singh. Collectively they depicted how Bankman-Fried masterminded the alleged fraud and pressed ahead with risky decisions despite concerns raised by close associates. The three have pleaded guilty and are cooperating with the government. 

Bankman-Fried’s defense lawyers have largely failed to shake their accounts, though they pointed out the witnesses went along with the decisions. 

Earlier Thursday, the government also called Eliora Katz, the former director of government relations and policy at FTX’s US arm. 

She read from tweets and written testimony Bankman-Fried made for congressional hearings in 2021 and 2022 — many of which occurred prior to when she said she joined the company in April 2022. 

One excerpt Katz was asked to read for the jurors came from Bankman-Fried’s written testimony for a December 2021 hearing before the House Financial Services Committee. 

“There are irresponsible actors in the digital-asset industry, and those actors attract the headlines, but FTX is not one of them and in fact has built a resilient, risk-reducing platform as a competitive advantage,” Bankman-Fried said at the time.