The USA Securities and Alternate Fee (SEC) has commenced authorized proceedings in opposition to an accounting agency that had offered providers tocryptocurrency trade FTX previous to its chapter declaration.
Based on a September 29 assertion, the SEC alleged that Prager Metis offered auditing providers to its purchasers with out sustaining the mandatory independence, because it allegedly continued to supply accounting providers. This follow is prohibited below the auditor independence framework.
To forestall conflicts of curiosity, accounting and audit duties should be stored clearly separate. Nevertheless, the SEC claims that these actions spanned over a interval of roughly three years:
“As alleged in our criticism, over a interval of practically three years, Prager’s audits, critiques, and exams fell wanting these elementary ideas. Our criticism is a vital reminder that auditor independence is essential to investor safety.”
Whereas the assertion does not explicitly point out FTX or every other purchasers, it does emphasize that there have been allegedly “lots of” of auditor independence violations all through the three-year interval.
Moreover, a earlier courtroom submitting identified that the FTX Group engaged Metis to audit FTX US and FTX sooner or later in 2021. Subsequently, FTX declared chapter in November 2022.
The submitting alleged that since former FTX CEO Sam Bankman-Fried publicly introduced earlier FTX audit outcomes, Metis ought to have acknowledged that its work could be utilized by FTX to bolster public belief.
Considerations have been beforehand reported concerning the materials introduced in FTX audit reviews.
On Jan. 25, present FTX CEO John Ray advised a chapter courtroom that he had “substantial considerations as to the data introduced in these audited monetary statements.”
Moreover, Senators Elizabeth Warren and Ron Wyden raised considerations about Prager Metis’ impartiality. They argued that it functioned as an advocate for the crypto business.
In the meantime, a legislation agency that offered providers to FTX has come below scrutiny in latest instances.
In a Sept. 21 courtroom submitting, plaintiffs allege that Fenwick & West may be held liable as a result of it reportedly exceeded the norm when it got here to its service choices to FTX.
Nevertheless, Fenwick & West asserts that it can’t be held accountable for a consumer’s misconduct so long as its actions stay throughout the bounds of the consumer’s illustration.