The accounting company Prager Metis is currently facing a lawsuit from the U.S. Securities and Exchange Commission (SEC) for violating regulations on auditor independence in its dealings with crypto exchange FTX.
According to the SEC Prager Metis provided audit and accounting services simultaneously to its clients over a span of around three years which’s against SEC rules. These rules require auditors to maintain independence from their clients in order to avoid potential conflicts.
During the years 2019 to 2021 it is alleged that Prager Metis conducted audits, reviews and examinations while also fulfilling the accounting needs of those same clients. The SEC sees this as a violation of the principles of auditor independence.
While court documents from 2021 do not explicitly mention any companies they indicate that Prager Metis audited the financial data of FTX including its subsidiary FTX US. Interestingly former CEO Sam Bankman Fried had presented audit results from Prager Metis as evidence of FTXs stability. However following FTXs bankruptcy in November 2022 due to allegations of mishandling customer assets new CEO John Ray has expressed doubts, about the accuracy of those financial statements.
Prager Metis has received criticism from U.S. Senators, who claim that the firm showed a bias towards supporting the crypto industry rather than remaining impartial as an auditor. However Prager Metis denies any wrongdoing in relation to its work with FTX.
The SEC emphasizes the importance of auditor independence in protecting investors. Considers the lawsuit, against Prager Metis as a reminder of the need to keep audit and other services separate.