Prager Metis CPAs, LLC
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26112 / September 18, 2024
Accounting and Auditing Enforcement No. 4520 / September 18, 2024
Securities and Exchange Commission v. Prager Metis CPAs, LLC, No. 1:24-cv-07025 (S.D.N.Y. filed Sept. 17, 2024)
Audit Firm Prager Metis Settles SEC Charges for Negligence in FTX Audits
The Securities and Exchange Commission today announced that Prager Metis CPAs, LLC (Prager) agreed to pay $745,000 to resolve an action alleging misconduct in its audits of the now-defunct crypto asset trading platform FTX Trading Ltd. (FTX).
The SEC alleges that Prager misrepresented its compliance with auditing standards regarding FTX. According to the SEC’s complaint, from February 2021 to April 2022, Prager issued two audit reports for FTX that falsely misrepresented that the audits complied with Generally Accepted Auditing Standards (GAAS). The SEC alleges that Prager failed to follow GAAS and its own policies and procedures by, among other deficiencies, not adequately assessing whether it had the competency and resources to undertake the audit of FTX. According to the complaint, this quality control failure led to Prager failing to comply with GAAS in multiple aspects of the audit—most significantly by failing to understand the increased risk stemming from the relationship between FTX and Alameda Research LLC, a crypto hedge fund controlled by FTX’s CEO.
The SEC’s complaint charges Prager with violating Sections 17(a)(2) and (a)(3) of the Securities Act of 1933. Without admitting or denying the SEC’s findings, Prager agreed to permanent injunctions, to pay a $745,000 civil penalty, and to undertake remedial actions, including retaining an independent consultant to review and evaluate its audit, review, and quality control policies and procedures and abiding by certain restrictions on accepting new audit clients. The settlement is subject to court approval.
The SEC’s ongoing investigation as to Prager’s audits of FTX is being conducted by Amy Burkart, David D’Addio, Devlin N. Su, Brian Huchro, and Pasha Salimi. It is being supervised by Michael Brennan, Amy Flaherty Hartman, and Jorge Tenreiro of the Crypto Assets and Cyber Unit.