SEC Launches Legal Battle against Accounting Firm over FTX Services
Summary:
The U.S. Securities and Exchange Commission (SEC) has launched legal action against Prager Metis, an accounting firm once associated with the now bankrupt crypto exchange, FTX. The SEC alleges that Prager Metis violated industry standards by failing to maintain independence, as it provided both accounting and auditing services to FTX over a near three-year period. Furthermore, a law firm that served FTX, Fenwick & West, has been implicated in potential liability claims but rejects this assertion.
The U.S. Securities and Exchange Commission (SEC) has commenced legal action against an accounting entity that once provided services to the now non-operational crypto exchange, FTX. In an official statement released on September 29, the SEC argues that Prager Metis, by continuing to supply accounting services while providing auditing services to FTX, failed to maintain the essential industry standard of independence. The regulator alleges this conduct extended over a near three-year period.
According to the SEC, these alleged actions underscore the importance of auditor independence to investor protection. While FTX is not directly named in the charges, the statement points to hundreds of reported infractions related to auditor independence.
A preceding court document notes the FTX Group appears to have contracted Metis to audit FTX US and FTX in 2021. FTX filed for bankruptcy in November 2022. The legal document suggests that in view of the publicized FTX audit findings by Bankman-Fried, Metis should have known its audit work would be used by FTX to boost public confidence.
Previously, concerns were raised about the data disclosed in the financial statements. On January 25, the current FTX CEO, John Ray, expressed significant worries to a bankruptcy court concerning the data shown in these audited financial statements. Furthermore, Senators Elizabeth Warren and Ron Wyden questioned whether the firm functioned impartially, stating they served as proponents for the crypto sphere.
In other news, a law firm that supplied services to FTX has been subjected to recent investigation. A court document released on September 21 asserts that Fenwick & West potentially faces liability as it reportedly went overboard with its FTX service delivery. However, Fenwick & West refutes these claims, saying they fall outside of their client representation remit.
Published At
10/1/2023 1:53:14 AM
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