The SEC has sued FTX’s former audit company

The U.S. Securities Commission (SEC) accused Prager Metis of encouraging numerous organizations to violate federal securities laws, which includes FTX.

The SEC has sued FTX’s former audit company. Photo: CoinDesk

On September thirty, 2023, the U.S. Securities and Exchange Commission (SEC) sued the audit company Prager Metis for allegedly violating auditor independence principles. Additionally, the SEC also accused the company of “aiding” its clientele – which includes 62 organizations – to violate federal securities laws.

The SEC asked the court to situation an working ban for Prager Metis and demanded that the business spend a fine and forfeit all revenue obtained from the aforementioned unlawful routines.

Today we announced costs towards global accounting company Prager Metis for committing hundreds of auditor independence violations. https://t.co/P7mBzw96x6

— US Securities and Exchange Commission (@SECGov) September 29, 2023

According to paperwork submitted to the court, in between December 2017 and October 2020, Prager Metis violated auditor independence specifications by which includes incorrect remuneration provisions in engagement letters. Conclusions for more than 200 audits.

There are provisions that oblige clientele to agree that Prager will be exempt from liability and exempt from having to pay commissions for “any intentional error on the part of management”. The SEC even more mentioned that Prager Metis had been informed by the regulator of these violations because at least January 2019, but the business even now “ignored” and continued to enforce the terms for buyers.

Mr. Eric I. Bustillo, Director of the SEC Office in Miami, USA, mentioned:

“Auditor independence is critical to protecting the integrity of financial reporting and promoting public trust…

Over a period of nearly three years, Prager’s audits, reviews and inspections failed to meet these core principles.

Our lawsuit serves as a reminder of the importance of independent auditing to help protect investors.”

Prager Metis CPAs, LLC (Prager Metis for brief) is a international audit company that audited the bankrupt cryptocurrency exchange FTX. However, it is really worth noting that the SEC complaint does not mention both FTX or any other buyers concerned, but merely focuses on Prager Metis’ violations of agreements signed with the organization and their purchaser base.

However, in 2021, FTX reported revenue of up to billions of bucks, so assisting the exchange organize capital calls to increase money with valuations of up to billions of bucks from numerous significant investment money. However, this quantity has been accused by US investigators of exhibiting indications of forgery and falsification of accounting books to hide exchange operations.

Prager Metis’ alleged violation of auditor independence principles is also an significant reminder to traders of the relevance of deciding upon trustworthy and independent audit companies.

The SEC’s move to sue Prager Metis can be viewed as a optimistic move for the cryptocurrency business. This exhibits that the SEC critically monitors audit companies and will not “tolerate” any wrongdoing. In the previous, the French auditing company Mazars had to delete Binance’s asset certification report simply because it could not assure the authenticity of the info. There is even info that even Big4 audit companies refuse to audit Binance’s books to restrict legal dangers.

The cryptocurrency investment neighborhood is also awaiting approval of Bitcoin/Ethereum Spot ETF proposals from the US Financial Conduct Authority, but the SEC continues to situation delay notices.

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