International accounting firm Prager Metis has agreed to pay $745,000 to settle U.S. SEC charges related to the firm’s improper audit of FTX prior to its collapse in November 2022.
The settlement announced Tuesday also includes the resolution of the SEC’s second investigation into Prager Metis, which accused the firm of violating auditor independence rules in its audits of more than 200 companies between 2017 and 2020. Prager Metis agreed to pay a $1.2 million civil penalty and prejudgment interest to resolve the charges. The settlement is subject to court approval.
The SEC charged Prager Metis with negligent fraud. In two audit reports prepared by Prager Metis for FTX in 2021 and 2022, the SEC alleged that the firm falsely represented that the audits were in compliance with Generally Accepted Auditing Standards (GAAS), when in fact, the firm “failed to comply with GAAS in multiple aspects of the audits.”
According to the SEC, Prager Metis "did not adequately assess whether it had the capabilities and resources to conduct audits of crypto exchanges." In addition to the fine, Prager Metis also agreed to a permanent injunction and remedial measures, including hiring an independent consultant to review and evaluate its audit and quality control policies, and "accepting certain restrictions on new audit clients." (CoinDesk)