The U.S. Securities and Exchange Commission (SEC) has reached a settlement with auditing firm Prager Metis, which agreed to pay $1.95 million to resolve allegations of misconduct related to its audits of now-defunct cryptocurrency exchange FTX.
$745,000 due to FTX audit failure
On Tuesday, the Securities and Exchange Commission It was announced Prager Metis and its California affiliate, Prager Metis CPAs, will pay a $745,000 civil penalty as part of the settlement.
In addition, the company will implement corrective measures, including hiring an independent consultant to review its audit and quality control policies. This settlement is pending court approval.
The SEC’s allegations revolve around Prager’s failure to comply with generally accepted auditing standards (GAAS) while conducting Auditing For FTX between February 2021 and April 2022.
The complaint alleges that Prager misrepresented its compliance with these standards, resulting in “significant deficiencies” in its audits.
Specifically, the SEC said Prager failed to adequately assess his ability to conduct the audit, particularly with regard to alleged risks associated with FTX’s relationship with Alameda Research Centerthe commercial arm of the defunct stock exchange.
Gurbir S. Grewal, director of the SEC’s Division of Enforcement, emphasized the need for auditors to maintain independence and exercise professional skepticism. He said:
Effective investor protection requires a collaborative approach that includes both regulators and supervisory bodies such as auditors. To fulfill their role, auditors must, among other things, be independent, exercise due professional care and skepticism, and comply with all applicable professional standards. As we allege in this enforcement action, Prager Metis has failed in all of these areas.
The case serves as a warning to other auditors against “taking a backseat” to compliance, added Jorge G. Tenrero, acting head of the SEC’s Crypto and Cyber Assets Unit. Legal Obligations.
The head of the regulator’s crypto and cyber unit has reiterated the SEC’s commitment to investigating potential violations in the crypto space and ensuring accountability for those who put investor confidence at risk.
Prager Metis Pays $1 Million for Violations
In a related case, Prager Metis also faced separate charges of violating auditor independence rules and aiding clients in violations of federal laws. Securities Laws.
The SEC alleged that between December 2017 and October 2020, the company “improperly” included compensation provisions in engagement letters for more than 200 audits, undermining its independence as required by federal law.
As part of solving these problems FeesThe company will be liable for combined civil penalties of $1 million, plus restitution and pre-judgment interest totaling $205,000.
At the time of writing, FTX’s native token, FTT, is trading at $1.28, down 0.6%, while the broader crypto market is seeing a more pronounced recovery led by the largest digital assets on the market.
Featured image by DALL-E, chart by TradingView.com