The US Securities and Exchange Commission (SEC) has settled with audit firm Prager Metis, which has agreed to pay $1.95 million to resolve misconduct allegations related to its audits of the now-defunct cryptocurrency exchange FTX.\u00a0<\/p>\n
On Tuesday, the SEC announced <\/a>that Prager Metis and its California affiliate, Prager Metis CPAs, would pay a civil penalty of $745,000 as part of the settlement.\u00a0<\/p>\n Additionally, the firm will implement remedial measures, including hiring an independent consultant to review its audit and quality control policies. This settlement is pending court approval.<\/p>\n The SEC\u2019s allegations revolve around Prager\u2019s failure to adhere to Generally Accepted Auditing Standards (GAAS) while conducting audits <\/a>for FTX between February 2021 and April 2022.\u00a0<\/p>\n The complaint indicates that Prager misrepresented its compliance with these standards, leading to \u201csignificant deficiencies\u201d in its auditing processes.\u00a0<\/p>\n Specifically, the SEC said Prager failed to adequately assess his ability to conduct the audit, particularly concerning the alleged risks associated with FTX\u2019s relationship with Alameda Research<\/a>, the trading arm of the defunct exchange.<\/p>\n Gurbir S. Grewal, Director of the SEC\u2019s Division of Enforcement, emphasized auditors\u2019 need to maintain independence and exercise professional skepticism. He stated:\u00a0<\/p>\n Effective investor protection requires a collaborative approach that includes both regulators and gatekeepers 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 these enforcement actions, Prager Metis fell short in all of these areas<\/p>\n Jorge G. Tenreiro, Acting Chief of the SEC\u2019s Crypto Assets and Cyber Unit, added that the case serves as a warning to other auditors against \u201ccutting corners\u201d in compliance with legal obligations<\/a>.\u00a0<\/p>\n The head of the regulator\u2019s Crypto and Cyber Unit reiterated the SEC\u2019s commitment to investigating potential violations in the crypto space and ensuring accountability for those who compromise investor trust.<\/p>\n In a related matter, Prager Metis also faced separate charges for violating auditor independence rules and aiding client violations of federal securities laws<\/a>.\u00a0<\/p>\n The SEC alleged that between December 2017 and October 2020, the firm \u201cimproperly\u201d included indemnification provisions in engagement letters for over 200 audits, undermining its independence as required by federal law.\u00a0<\/p>\nPrager Metis To Pay $1 Million For Indemnification Violations<\/h2>\n