Forvis Mazars
Proof of Reserves under deadline pressure
An audit firm needed working reserve verification tooling for exchange clients in the weeks after FTX, with a deadline measured in days rather than quarters.
Named engagement. Client detail on this page is limited to what Sixpence publishes about the relationship.
- Client
- Forvis Mazars
- Sector
- Professional services and assurance
- Capability
- Cryptographic assurance tooling
- Constraint
- Deadline measured in days
- Updated
The mandate
Give an audit firm the technical means to verify that exchange clients held the assets they said they held, quickly enough to matter while the market was still moving.
The situation
The collapse of FTX in November 2022 changed what exchange clients were being asked for and how fast. Boards, counterparties and depositors wanted verification rather than assertion, and they wanted it immediately. Audit firms found themselves asked to opine on reserve positions using methods that had no established practice behind them and no tooling in the firm.
The technical problem was not conceptually hard. A Merkle commitment over customer liabilities and a demonstration of control over on-chain assets is well understood. The difficulty was that it had to be built correctly, be independently verifiable, work across multiple chains and address structures, and be usable by practitioners who were auditors rather than cryptographers. On a deadline measured in days.
What was built
- 01
Liability commitment pipeline
Extraction of customer balance sets into a Merkle tree, producing a published root and per-customer inclusion paths so an individual can verify their own balance was in the committed total without seeing anyone else’s.
- 02
Asset control verification
Signature-based demonstration of control over nominated addresses rather than assertion by listing, with independent reading of on-chain balances at a fixed block height.
- 03
Practitioner tooling
Interfaces built for the audit team rather than for engineers, so the procedure could be executed and evidenced by the people responsible for the opinion.
- 04
Evidence pack
Reproducible outputs with recorded tool versions, snapshot heights and parameters, structured to sit inside an audit file rather than beside it.
How it was approached
The sequencing decision that mattered was refusing to build a general platform. Under that kind of time pressure, generality is what kills delivery. The work targeted the specific procedure the practitioners needed to perform, with the surrounding structure designed so it could be extended later rather than anticipating extension up front.
We were explicit with the firm about what the procedure could and could not support. A proof establishes that verifiable assets matched committed liabilities at a moment in time. It says nothing about undisclosed liabilities, nothing about encumbrance, and nothing about the period either side of the snapshot. Saying so plainly, in writing, was part of the deliverable rather than a caveat attached to it.
Outcome
- Working reserve verification tooling available to the firm’s exchange audit clients inside the window where it was commercially relevant.
- A documented procedure with reproducible outputs suitable for inclusion in an audit file.
- A clear written scope statement distinguishing what the cryptographic procedure establishes from what requires assurance work.
- A reusable basis for subsequent reserve engagements rather than a single-use exercise.
Capability transferred
- Audit practitioners able to execute the procedure without cryptographic support present.
- Documentation of the method, its limits and the questions a reviewer should ask of any published proof.
- A repeatable evidence structure the firm controls.
Methods
- Merkle-tree liability commitments
- Signature-based proof of address control
- Multi-chain balance verification
- Reproducible evidence capture