The Securities and Exchange Commission (SEC) today announced that Prager Metis CPAs, LLC and its California professional services firm, Prager Metis CPAs LLP, have agreed to pay a total of $1.95 million to settle two actions alleging misconduct in their audits of the now-defunct crypto asset trading platform, FTX.
In one of the actions, the SEC alleges that Prager misrepresented its compliance with auditing standards regarding FTX. According to the SEC’s complaint, Prager issued two audit reports for FTX that falsely claimed to have complied with Generally Accepted Auditing Standards (GAAS). However, the SEC found that Prager failed to follow GAAS and its own policies and procedures, including by not adequately assessing its competency and resources to audit FTX.
The SEC also alleges that Prager violated auditor independence rules by including indemnification provisions in engagement letters for more than 200 audits. These provisions made Prager financially dependent on its clients, compromising its independence.
As part of the settlement, Prager has agreed to pay a $745,000 civil penalty and $1.205 million in disgorgement and prejudgment interest. Additionally, Prager will be required to retain an independent consultant to review its audit, review, and quality control policies and procedures.
