FTX auditor fined $2 million by SEC to settle negligence allegations News ▸ US ▸ FTX ▸ Regulation
FTX auditor fined $2 million by SEC to settle negligence allegations
The settlement is related to two FTX audit reports from February 2021 to April 2022 where the SEC found traces of negligence.
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Updated: Sep. 17, 2024 at 11:32 pm UTC
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Prager Metis CPAs has agreed to pay $1.95 million to settle two U.S. Securities and Exchange Commission (SEC) actions alleging misconduct in its audits of FTX and violations of auditor independence rules, according to a Sept. 17 statement.
The settlement addresses negligence-based fraud charges related to FTX audits and separate charges for violating auditor independence rules.
Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit, emphasized:
“Once more we see an entity, lured by the siren song of the crypto asset markets, cutting corners on its obligations to comply with the law.”
The SEC claims Prager misrepresented compliance with Generally Accepted Auditing Standards (GAAS) in two FTX audit reports from February 2021 to April 2022.
Additionally, the firm allegedly failed to assess its competency for the FTX audit and didn’t understand the risks associated with the exchange’s relationship with Alameda Research.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, added that Prager’s audits were conducted without due care, resulting in FTX investors lacking crucial protections when making their investment decisions.
Without admitting or denying the findings, Prager agreed to permanent injunctions, a $745,000 civil penalty for the FTX-related charges, and remedial actions, including an independent consultant review of its audit procedures.
In a separate settlement, the Prager Entities agreed to resolve previous charges of violating auditor independence rules, paying $1 million in civil penalties and $205,000 in disgorgement with prejudgment interest.
The settlements are subject to court approval, and the SEC’s investigation into Prager’s FTX audits is ongoing.
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Gino Matos
Gino Matos is a law school graduate and a seasoned journalist with six years of experience in the crypto industry. His expertise primarily focuses on the Brazilian blockchain ecosystem and developments in decentralized finance (DeFi).
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FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
Sam Bankman-Fried is the former CEO, and co-founder of defunct crypto exchange FTX and Alameda Research.
Caroline Ellison is the former lead trader and former CEO at Alameda Research.
Ryan Salame is the former co-CEO at FTX Digital Markets (FDM), the Bahamian subsidiary of FTX Trading Limited.