SEC Now Targeting Audit Firms That Serviced Crypto Industry

October 3, 2023 12:24 pm Comments

The Securities and Exchange Commission (SEC) is now targeting a different sector of the fledgling crypto industry.

Prager Metis is an auditing firm that helped conduct audits for FTX and other notable clients, yet the collapse of FTX drew the watchful eye of federal regulators.

According to a recent court filing, the SEC is now suing Prager Metis for what they claim is a breach of auditor independence.

The government agency alleges that Prager Metis essentially helped these firms cook the books and misrepresent their assets to clientele, customers, creditors, shareholders, and investors.

The SEC announced late last month: “Today we announced charges against international accounting firm Prager Metis for committing hundreds of auditor independence violations.”

CoinDesk reports:

Prager Metis audited FTX’s international arm and reported $1 billion in revenues in 2021, CoinDesk reported in November, on the same day that FTX filed for bankruptcy in the U.S. – with a $7 billion shortfall on its balance sheet. The company also had plans to open a location in the Metaverse. The SEC’s complaint, however, isn’t centered on the auditor’s ties to FTX but on agreements the firm made with its numerous clients.

Donya Topham outlined the current charges the SEC has levied against the audit firm Prager Metis, she writes:

“This case underscores the regulatory scrutiny surrounding the crypto industry, with a focus on maintaining transparency and adherence to standards.

Legal Implications: The outcome of this legal action could have significant implications for both Prager Metis and its client, the FTX Group, as well as broader implications for the crypto audit landscape.”

Protos added:

This action against Prager Metis isn’t the first time the government regulator has taken on an auditor this year.

In June, the SEC settled with Marcum LLP over its “control deficiencies” in regard to SPACs (Special Purpose Acquisition Companies). Marcum took on roughly 600 different SPACs as their auditor, with 25-50% of those audits showing violations from the auditor. For the 150-300 penalized audits Marcum was ordered to pay a fine of $10 million.

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