Prager Metis CPAs has agreed to pay $1.95 million to settle two actions brought by the U.S. Securities and Exchange Commission (SEC) for misconduct in its audits of FTX and violations of auditor independence rules, according to a release. a statement dated September 17.
The settlement covers negligence-based fraud charges related to FTX audits and separate charges of violating auditor independence rules.
Jorge G. Tenreiro, Acting Head of the SEC’s Crypto Assets and Cyber Unit, emphasized:
“Once again we see an entity, lured by the siren song of the crypto asset markets, skimping on its obligations to comply with the law.”
The SEC alleges that Prager misrepresented compliance with Generally Accepted Auditing Standards (GAAS) in two FTX audit reports from February 2021 to April 2022.
Furthermore, the company allegedly failed to assess its competency for the FTX audit and did not 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 diligence, leaving FTX investors without 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 corrective action, including an independent consultant review of the audit procedures.
In a separate settlement, the Prager entities agreed to resolve previous allegations 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.