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.