Prager Metis CPAs Settles with SEC for $1.95 Million Over FTX Audits
Prager Metis CPAs has reached a settlement agreement with the U.S. Securities and Exchange Commission (SEC) to pay $1.95 million to resolve allegations of misconduct in its audits of FTX and violations of auditor independence rules, as announced in a statement on Sept. 17.
The settlement encompasses charges of negligence-based fraud related to FTX audits and violations of auditor independence regulations. In response to the settlement, Jorge G. Tenreiro, Acting Chief of the SEC’s Crypto Assets and Cyber Unit, highlighted the dangers of cutting corners in compliance with the law:
“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 alleges that Prager misrepresented its compliance with Generally Accepted Auditing Standards (GAAS) in two FTX audit reports spanning from February 2021 to April 2022. Furthermore, the firm allegedly neglected to assess its competence for the FTX audit and failed to grasp the risks associated with the exchange’s relationship with Alameda Research.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasized that Prager’s audits lacked due care, leaving FTX investors without essential protections when making 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 addressed previous charges of violating auditor independence rules by agreeing to pay $1 million in civil penalties and $205,000 in disgorgement with prejudgment interest.
Both settlements are pending court approval, and the SEC’s investigation into Prager’s FTX audits remains ongoing.