KANALCOIN NEWS – The SEC filed another lawsuit. This time it was against Prager Metis, a public accounting firm that once conducted an audit of the FTX crypto exchange which has now gone bankrupt. The reason is a violation of auditor independence rules. The SEC claims that Prager Metis allegedly violated auditor independence rules and assisted its clients in violating federal securities laws.
Anomaly in Prager Metis
According to the complaint filed with the SEC, Prager Metis included indemnification provisions in their letters of intent with more than 200 clients, including 62 SEC-registered entities, from December 2017 to October 2020. These provisions required clients to release Prager Metis from any liability and costs resulting from intentional misstatements by their management.
Given this situation, the SEC alleged that Prager Metis was not independent in carrying out its duties as an independent auditor. Thus preventing them from complying with independent auditor standards.
Not only that. The SEC also alleged that Prager Metis had committed these violations since January 2019. But it has continued to sign the agreement letter containing the compensation clause until now.
As is known, Prager Metis as an accounting firm must uphold a code of ethics of independence in carrying out its duties. Carrying out his obligations and profession without siding with any agency. In order to produce reports that can be used to make decisions for many related parties.
Questionable independence
One of Prager Metis’ clients is FTX Group, FTX’s parent company. In November 2022, FTX, a cryptocurrency exchange platform, filed for bankruptcy. As a public accounting firm, Prager Metis audited FTX’s international arm and reported $1 billion in revenue for 2021. But FTX is facing accusations from the U.S. government of a massive fraud scheme that left a $7 billion shortfall in its balance sheet. Not only that. FTX has every intention of being present in the Metaverse.
Please note that the Securities and Exchange Commission (SEC) lawsuit against Prager Metis is not directly related to its relationship with FTX. But it only focuses on Prager Metis’ general behavior as an auditor for its many clients. It doesn’t just aim to get justice. The SEC also aims to impose penalties, request disgorgement of ill-gotten gains, and pursue other necessary legal remedies from Prager Metis.
“Auditor independence is critical to protecting the integrity of financial reporting and increasing public trust. As alleged in our complaint, for nearly three years, Prager’s audits, reviews and inspections failed to meet these basic principles. “Our complaint is an important reminder that auditor independence is critical to investor protection,” said Eric I. Bustillo, director of the SEC’s regional office in Miami.
Until now, Prager Metis, a company that operates in North America, Europe, Asia and Australia, has not responded to the SEC’s allegations. Not only providing independent audits. This company also provides various other accounting services. Such as audit, tax, consulting, business management, forensic accounting, and litigation support.
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