The United States Securities and Exchange Commission (SEC) has commenced legal proceedings against an accounting agency that had offered companies to cryptocurrency change FTX earlier than its chapter declaration.
According to a Sept. 29 assertion, the SEC alleged that accounting agency Prager Metis offered auditing companies to its purchasers with out sustaining the required independence because it continued to supply accounting companies. This follow is prohibited underneath the auditor independence framework.
To forestall conflicts of curiosity, accounting and audit duties have to be saved separate. However, the SEC claims that these entwined actions occured over roughly three years:
“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.”
While the assertion doesn’t explicitly point out FTX or another purchasers, it does emphasize that there have been allegedly “hundreds” of auditor independence violations all through the three-year interval.
Furthermore, a earlier court docket filing highlighted that the FTX Group engaged Metis to audit FTX US and FTX sooner or later in 2021. Subsequently, FTX declared chapter in November 2022.
The submitting alleged that since former FTX CEO Sam Bankman-Fried publicly introduced earlier FTX audit outcomes, Metis ought to have acknowledged that FTX would use its work to bolster public belief.
Related: FTX founder’s plea for temporary release should be denied, prosecution says
Concerns have been beforehand reported concerning the materials introduced in FTX audit reviews.
On Jan. 25, present FTX CEO John J. Ray III instructed a chapter court docket that he had “substantial concerns as to the information presented in these audited financial statements.”
Furthermore, Senators Elizabeth Warren and Ron Wyden raised concerns about Prager Metis’ impartiality. They argued that it functioned as an advocate for the crypto business.
Meanwhile, a regulation agency that offered companies to FTX has lately been sc.
In a Sept. 21 court docket submitting, plaintiffs allege that U.S.-based regulation agency, Fenwick & West, ought to be held partially liable for FTX’s collapse as a result of it reportedly exceeded the norm relating to its service choices to the change.
However, Fenwick & West asserts that it can’t be held accountable for a consumer’s misconduct so long as its actions stay inside the bounds of the consumer’s illustration.
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