Prager Metis to Pay $745,000 to Settle SEC Charges Related to FTX Audit

International accounting firm Prager Metis has agreed to pay $745,000 to settle charges from the U.S. Securities and Exchange Commission (SEC) related to its improper audit of FTX before the crypto exchange's collapse in November 2022. The settlement, announced on Tuesday, also resolves a second SEC investigation into Prager Metis that accused the firm of violating auditor independence rules in audits of over 200 companies between 2017 and 2020. Prager Metis has agreed to pay $1.2 million in civil penalties and prejudgment interest to settle these charges. The settlement is subject to court approval.

The SEC accused Prager Metis of negligent misrepresentation. In two audit reports prepared for FTX in 2021 and 2022, the SEC alleges, the firm falsely claimed the audits were performed in accordance with generally accepted auditing standards (GAAS) when, in reality, the firm "failed to comply with GAAS in numerous aspects of the audits." According to the SEC, Prager Metis "did not adequately evaluate whether it had the competence and resources to audit a cryptocurrency exchange."

In addition to the fines, Prager Metis has agreed to permanent injunctions and remedial measures, including engaging an independent consultant to review and assess its audit and quality control policies, as well as "accepting certain limitations on new audit clients." (CoinDesk)