The US Securities and Exchange Commission (SEC) has reached a settlement with audit firm Prager Metis over claims of misconduct in its auditing practices related to the collapsed cryptocurrency exchange FTX.
Accusations Against Prager Metis
The SEC stated that Prager Metis issued two audit reports that misstated the financial condition of cryptocurrency firm FTX from February 2021 to April 2022. The regulator alleges that Prager Metis violated Generally Accepted Auditing Standards and did not perform due diligence to determine its qualification to audit FTX.
Settlement with SEC
As part of the settlement, Prager Metis agrees to pay $1.95 million to resolve charges related to the auditing of FTX, which collapsed in November 2022. Additionally, the SEC resolved a separate investigation of Prager Metis for violations of auditor independence rules, with Prager Metis agreeing to pay $1.2 million in civil penalties.
Impact on Investors
Bankman-Fried was found guilty of siphoning off billions of dollars from FTX customers and using it to cover losses at Alameda. The sudden collapse led to bankruptcy and significant losses for clients. SEC enforcement chief Gurbir Grewal stated that Prager Metis' deficient audits denied investors critical protections and made them vulnerable to fraud.
Although Prager Metis neither admitted nor denied the findings from the SEC, the firm agreed to permanent injunctions and penalties. Prager Metis attorney Bruce Braun said the firm was pleased to settle the matter and considered itself a victim of FTX's fraudulent management.
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