Betty Gordon and Bob Henderson leave Oklahoma to return east to Washington. Betty is to attend Shadyside School, and Bob is to attend Salsette Military Academy, which is just across the lake from Shadyside. Betty's friends, Bobby, Louise, and Libbie Littell, and Betty's friends, Norma and Alice Guerin, are also to attend Betty's school.

Betty and her friends quickly become settled into their new routine, but Norma and Alice Guerin sadly reveal that they may have to leave at Christmas. Their family has run out of money, in part because their grandmother's treasure is lost. It just so happens that the treasure was lost at the bottom of Indian Chasm, which is near Shadyside School. Over the years, various people have searched for the treasure, but no trace has ever been found.

A spoiled, snobbish girl, Ada Nansen, learns of the financial problems of the Guerin family and belittles the girls at every opportunity. Betty gets into trouble as she valiantly defends the Guerins, and in the back of her mind is the thought that she might somehow locate the treasure of Indian Chasm and help her friends.