As a seasoned crypto investor with a decade of experience under my belt, this latest development involving Prager Metis CPAs settling with the SEC for their negligence and violations during their audits of FTX is a stark reminder of the need for due diligence and transparency in the cryptocurrency industry.
Prager Metis CPAs has reached an agreement with the Securities and Exchange Commission (SEC) to pay a sum of $1.95 million due to accusations of careless auditing and breaches of auditor impartiality regulations during their audits of the cryptocurrency exchange, FTX.
Settlement Details and Background
In a $1.95 million settlement, Prager Metis CPAs, who was FTX’s auditor during the period from February 2021 to April 2022, has agreed with the U.S. Securities and Exchange Commission (SEC). The agreement follows accusations of misconduct in their audits of the crypto exchange, FTX. The SEC’s probe uncovered proof that they had been careless and breached rules regarding auditor independence during these audits.
Charges and Misconduct
The Securities and Exchange Commission (SEC) found that Prager Metis had given false information about their compliance with standard auditing practices (Generally Accepted Auditing Standards or GAAS), as stated in their audit reports for FTX. Moreover, they neglected to disclose substantial risks related to FTX’s connection with Alameda Research. This negligence during the auditing process resulted in accusations of fraud based on carelessness.
According to remarks made in a recent press statement, Jorge G. Tenreiro, who is currently serving as the interim head of the Securities and Exchange Commission’s (SEC) Crypto Assets and Cyber Unit, offered his insights.
Again, it’s apparent that a business is being tempted by the allure of the cryptocurrency market, choosing to disregard legal requirements in the process.
Financial Penalties and Remedial Actions
Prager Metis has consented to pay a total fine of $1.95 million. This amount comprises a civil penalty of $745,000 for FTX-related charges, another $1 million in combined penalties, and $205,000 in disgorgement with prejudgment interest. Moreover, the firm will accept permanent restrictions on its activities and undergo an independent review of their auditing practices.
In a separate agreement, Prager Metis settled charges related to violations of auditor independence rules, agreeing to pay $1 million in civil penalties and $205,000 in disgorgement.
SEC Director: Prager Metis Fell Short
Gurbir S. Grewal, head of the Securities and Exchange Commission’s (SEC) Enforcement Division, underscored the essential part auditors play in safeguarding investors, stressing the importance of a cooperative relationship between regulators and auditors to ensure robust investor protection.
He noted that Prager Metis fell short in terms of auditor independence, professional care, and adherence to standards in its audits of FTX, leading to the investors being left without essential protections, and subsequent financial losses when the exchange collapsed.
Supporting the steps taken against the firm by the SEC, Grewal said,
Today’s decisions, which restrict Prager from acquiring new clients and compel them to hire an external compliance advisor, not only strengthen investor safety but also act as a cautionary tale for auditors who fail to fulfill their duty of care.
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2024-09-18 18:11