Prager Metis to pay $745,000 fine for negligence in FTX audits

Prager Metis CPAs, LLC has agreed to pay $745,000 to settle charges from the U.S. Securities and Exchange Commission (SEC) related to failures in its audits of the failed cryptocurrency exchange FTX. 

The SEC found that between February 2021 and April 2022, Prager Metis issued audit reports for FTX that wrongly said they followed Generally Accepted Auditing Standards (GAAS). 

The company did not properly evaluate its ability to conduct these audits, especially when it came to the risks involving FTX’s connection with Alameda Research, a hedge fund tied to FTX.

The SEC is accusing Prager of fraud due to carelessness. Without admitting or denying the claims, Prager agreed to permanent restrictions, to pay a $745,000 fine, and to take corrective steps. 

These steps include hiring an outside expert to check its audit and quality control processes and following rules about accepting new clients. Although, the settlement still needs approval from the court.

The SEC stressed that protecting investors depends on auditors being independent and doing their work carefully. This case serves as a warning to auditors about the consequences of not following the law properly. 

In addition to the FTX-related penalties, Prager Metis also faced separate charges for including improper legal protections in agreements for more than 200 audits, which affected their independence from clients.

Prager Metis CPAs, LLC is a professional accounting firm that provides a wide range of services, including audit, tax, and consulting. The firm operates in multiple locations and serves various industries, including financial services, real estate, and technology. 

Meanwhile, FTX’s leaders have been charged with serious crimes like fraud and money laundering. Sam Bankman-Fried (SBF), the founder of FTX, was sentenced to 45 years in jail. However, a new management team is now guiding the company in a different direction. Recently, SBF appealed his sentence, asking for the court to reconsider the decision.