SEC files charges against Prager Metis CPAs after alleged audit violations

SEC files charges against Prager Metis CPAs after alleged audit violations

The SEC filed charges against global accounting firm Prager Metis CPAs in the wake of alleged audit independence violations and purportedly contributing to its clients' breach of federal securities laws.

Prager Metis served as the auditor for the now bankrupt cryptocurrency exchange FTX Group 2021, and the current FTX CEO, John Ray III, has previously expressed apprehensions about the accuracy of information in the audits conducted by the firm.

The violations highlighted in the filings were reportedly spanning from December 2017 to October 2020, and the SEC has not directly mentioned FTX in the filing.

Prager Metis told Reuters in a statement that he plans to 'vigorously defend itself in court'. The firm added: ''It's a big company,'' adding: ''The firm has a lot of people working for it.

The SEC alleges that Prager Metis incorporated indemnification provisions in over 200 audits, reviews, and exams, a practice that reportedly violates auditor independence according to federal securities laws.

The regulatory agency wrote in its filing:

These policies were allegedly continued, despite senior partners at Prager Metis being alerted that such inclusion impaired their independent status. Many of these reports were included in U.S. filings with the SEC, and Prager Metis allegedly did not tell its clients about the violations.

Senators Elizabeth Warren and Ron Wyden have voiced concerns about Prager Metis' objectivity, saying that the firm acted more as an advocate for the crypto industry rather than maintaining impartiality.

The SEC's legal complaint, filed in the U.S. District Court for the Southern District of Florida, seeks a permanent injunction, disgorgement plus prejudgment interest, and a civil monetary penalty against Prager Metis for the alleged violations.

The SEC's ongoing investigation underscores the agency's dedication to safeguarding the integrity of financial reporting and enforcing auditor independence to boost public trust.

The case highlights the crucial importance of auditor independence in securing investor protection and maintaining the reliability of financial discloses, particularly in sectors such as cryptocurrency, which are under increased scrutiny.