The Securities and Exchange Commission (SEC) says it has settled charges with Prager Metis CPAs, LLC (Prager) in regard to its relationship with the failed crypto operation FTC. The SEC states that Prager has agreed to pay $1.95 million to resolve two actions alleging misconduct in its audits of FTX, and auditor independence violations.
The SEC’s complaint alleges that Prager issued two audit reports for FTX that falsely misrepresented that the audits complied with Generally Accepted Auditing Standards (GAAS). The SEC alleges that Prager failed to follow GAAS and its own policies and procedures by, among other deficiencies, not adequately assessing whether it had the competency and resources to undertake the audit of FTX. This “quality control failure” allegedly led to Prager failing to comply with GAAS in multiple aspects of the audit, pointedly the relationship between FTX and Alameda Research LLC, a crypto hedge fund controlled by FTX’s CEO.
Gurbir Grewal, Director of the SEC’s Division of Enforcement, said FTX audits did not provide investors with vital information when making investment decisions.
“Ultimately, they were defrauded out of billions of dollars by FTX and bore the consequences when FTX collapsed. By limiting Prager’s ability to take on new business and by requiring it to retain an independent compliance consultant, today’s resolutions not only enhance investor protection, they also serve as a warning to audit professionals that are not appropriately meeting their gatekeeping obligations.”
The SEC’s investigation as to Prager’s audits of FTX is ongoing.
