The U.S. Securities and Exchange Commission (SEC) has filed charges against global accounting firm Prager Metis CPAs for alleged auditor independence violations and contributing to clients’ breaches of federal securities laws. Prager Metis, which served as the auditor for the now-bankrupt cryptocurrency exchange FTX Group 2021, has been accused of incorporating indemnification provisions in engagement letters for over 200 audits, reviews, and exams, compromising auditor independence. These violations reportedly occurred between December 2017 and October 2020.
FTX CEO John Ray III has previously expressed doubts about the validity of Prager Metis’ audits. However, the SEC has not specifically mentioned FTX in the filing. Prager Metis has stated its intention to vigorously defend itself in court, claiming that the allegations stem from outdated template indemnification language that was never enforced and did not affect the quality of their audits.
The SEC’s legal complaint seeks a permanent injunction, disgorgement with prejudgment interest, and a civil monetary penalty against Prager Metis. The case underscores the importance of auditor independence in maintaining investor protection and financial reporting integrity. It also highlights the increased scrutiny faced by industries like cryptocurrency.
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