According to a Friday court document, the Securities and Exchange Commission has charged former FTX auditing company Prager Metis with breaking American auditor independence laws.The SEC claims that the company aided its clients in breaking federal securities rules, including 62 firms that were registered with the regulator.It requests a restraining order against the auditor and demands that it forfeit any earnings earned via illicit activities in addition to paying fines.
In November, on the same day that FTX filed for bankruptcy in the United States with a $7 billion shortfall on its balance sheet, Prager Metis, an auditing firm, reported $1 billion in revenues for the foreign division of FTX in 2021.In addition, the business intended to establish a presence in the Metaverse.However, the SEC’s complaint is focused on the agreements the firm signed with its multiple clients rather than the auditor’s connections to FTX.
According to a document filed on Friday with the U.S. District Court for the Southern District of Florida, Prager Metis violated the independence requirements for auditors by entering into agreements with clients that included indemnification clauses, where clients agreed to hold Prager harmless from liabilities and expenses from its services “attributable to any knowing misrepresentations by management.”The agency additionally asserted that the auditor has been informed of these irregularities since at least January 2019.
“Auditor independence is critical to both protecting the integrity of financial reporting and promoting public trust. As alleged in our complaint, over a period of nearly three years, Prager’s audits, reviews, and exams fell short of these fundamental principles. Our complaint is an important reminder that auditor independence is crucial to investor protection,” Eric I. Bustillo, director of the SEC’s Miami regional office said in a press statement.