The SEC has filed charges against global financial firms Prager Metis CPAs for a array of alleged auditor independence violations and purportedly contributing to its clients' breach of federal securities laws.
Prager Metis served as the auditor for the FTX Group 2021 cryptocurrency exchange, and current FTX CEO John Ray III has recently expressed apprehensions about the accuracy of information in the audits conducted by the firm.
The violations mentioned in the files spanned from December 2017 to October 2020, and the SEC has not directly mentioned FTX in the filing.
Prager Metis said in a statement that it intends to 'vigorously defend itself in court'. The firm added: 'It's a good business to invest in,' which means a lot of money.
The SEC contends that Prager Metis infringed on indemnification policies in more than 200 audits, reviews, and exams, a practice that violates auditor independence according to federal securities laws.
The regulatory agency wrote in its suit: ''Spending this time is not a matter of law,'' according to the suit.
The regulations were allegedly continued, despite senior partners at Prager Metis warning that such inclusion impaired their independent status. Many of these reports were included in filings with the SEC, and Prager Metis allegedly didn't tell its clients about the violations.
Senators Elizabeth Warren and Ron Wyden have raised concerns about Prager Metis' objectivity, speculating that the firm acted more as a supporter for the crypto industry rather than maintaining impartiality.
The SEC's legal complaint, filed Friday 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 investigation shows that the agency is dedicated to maintaining the integrity of financial reporting and promoting audit independence in order to enhance public trust.
The case is a reminder of the vital importance of auditor independence in securing investor protection and maintaining the reliability of financial discloses, particularly in sectors such as cryptocurrency, under increased scrutiny.