The Securities and Exchange Commission (SEC) has filed a lawsuit accusing Prager Metis, the former auditing company for the defunct cryptocurrency exchange FTX, of breaking American auditor independence laws.
According to the SEC, the company allegedly helped its clients violate federal securities laws, including 62 businesses that are subject to SEC regulation. The SEC is pursuing a court order to stop the auditing firm from committing additional violations, as well as fines and the confiscation of any income made via these illegal operations.
According to a report from November, Prager Metis conducted an audit of FTX’s foreign branch and found that the unit had made $1 billion in revenue in 2021.
It’s interesting to note that FTX declared bankruptcy in the US on the same day, revealing a $7 billion shortfall on its financial records. FTX intended to have a presence in the Metaverse, it’s important to note.
The SEC’s complaint, however, focuses on the contracts that FTX had made with its multiple clients rather than Prager Metis’ relationship to FTX.
It was recently revealed that Prager Metis had broken the standards governing auditor independence in a filing to the U.S. District Court for the Southern District of Florida.
This breach happened because Prager Metis signed contracts with clauses that let customers release the company from all legal liabilities and costs resulting from its services, especially those related to willful misrepresentations made by management of a company.
Prager Metis was allegedly alerted of these irregularities as early as January 2019, according to the regulatory body.
In a press release, the SEC’s Miami regional office director, Eric I. Bustillo, stated that “auditor independence is critical to both protecting the integrity of financial reporting and promoting public trust.”
He continued, “As asserted in our complaint, Prager’s audits, reviews, and tests over a period of over three years fell short of these essential criteria. The need of auditor independence for investor protection is emphasized by our complaint.
More From The Kangaroo Times