Thomas Daniels
The U.S. Securities and Exchange Commission (SEC) has reached a settlement with Prager Metis, the auditing firm implicated in the financial collapse of the crypto exchange FTX. Prager Metis agreed to pay $1.95 million to resolve two SEC charges, which allege that the firm issued misleading audit reports for FTX between February 2021 and April 2022.
According to the SEC, Prager Metis failed to adhere to generally accepted auditing standards. The firm’s audits overlooked significant risks, including FTX’s relationship with its sister company, Alameda Research, which ultimately led to severe investor losses. The regulatory body noted that Prager’s negligent audits deprived investors of essential protections, contributing to billions in losses when FTX collapsed.
The SEC’s Director of Enforcement, Gurbir S. Grewal, stated that the audit failures were a key factor in enabling FTX’s deceptive practices, which ultimately defrauded investors. FTX, once a dominant name in the crypto space alongside Binance and Coinbase, was exposed in 2022 for falsifying financial statements and commingling client funds with corporate assets.
FTX’s downfall culminated in a liquidity crisis, prompting its founder, Sam Bankman-Fried (SBF), to halt withdrawals and file for bankruptcy. Following his extradition to the U.S., Bankman-Fried was sentenced to 25 years in prison. Last week, his legal team formally appealed the conviction, alleging judicial bias and seeking a new trial. SBF continues to maintain that he did not intentionally defraud investors, despite the loss of over $8 billion.
