SEC initiates legal action against FTX’s auditor

The USA Securities and Trade Fee (SEC) has initiated authorized proceedings in opposition to an accounting agency that had beforehand supplied companies to the now-defunct cryptocurrency trade FTX.

In keeping with a September 29 assertion, the SEC alleged that Prager Metis supplied auditing companies to its purchasers with out sustaining the mandatory independence, because it allegedly continued to supply accounting companies, a observe that’s prohibited within the trade.

The SEC claims that these actions spanned roughly three years:

“As alleged in our criticism, over a interval of practically three years, Prager’s audits, evaluations, and exams fell in need of these basic rules. Our criticism is a vital reminder that auditor independence is essential to investor safety.”

Whereas the assertion does not explicitly point out FTX or every other purchasers, it does emphasize that there have been allegedly “a whole lot” of auditor independence violations all through the three-year interval.

Moreover, a earlier court docket submitting identified that the FTX Group engaged Metis to audit FTX US and FTX in some unspecified time in the future in 2021. FTX declared chapter in November 2022. 

The submitting claimed that given Bankman-Fried’s public announcement of earlier FTX audit outcomes, Metis ought to have been conscious that its work can be utilized by FTX to reinforce public belief.

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Considerations had been beforehand reported concerning the fabric offered in FTX’s monetary statements.

On Jan. 25, present FTX CEO John Ray instructed a chapter court docket that he had “substantial considerations as to the data offered in these audited monetary statements.”

Moreover, Senators Elizabeth Warren and Ron Wyden raised considerations in regards to the agency’s impartiality, contending that they functioned as advocates for the crypto trade.

In the meantime, a regulation agency that supplied companies to FTX has come beneath scrutiny in current occasions.

In a Sept. 21 court docket submitting, plaintiffs allege that Fenwick & West may be held liable as a result of it reportedly exceeded the norm when it got here to its service choices to FTX.

Nonetheless, Fenwick & West asserts that it can’t be held accountable for a consumer’s misconduct so long as its actions stay inside the bounds of the consumer’s illustration.

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