Prager Metis Penalized $1.95 Million By Securities Commission For False FTX Reports

Prager Metis Penalized $1.95 Million By Securities Commission For False FTX Reports

The former cryptocurrency exchange company filed for bankruptcy in 2022

Prager Metis, a former auditor for FTX, has been ordered to pay $1.95 million to settle two US Securities and Exchange Commission (SEC) cases.

It includes the alleged negligence in auditing the cryptocurrency exchange that Sam Bankman-Fried led before being convicted of fraud.

Prager Metis has neither admitted nor denied wrongdoing in agreeing to the settlements, including a $1.75 million fine, plus disgorged profit and interest.

The New York-based firm was accused of falsely representing that its FTX audit reports in July 2021 and April 2022 complied with generally accepted auditing standards.

The SEC stated that the Prager Metis partner leading the audits "fundamentally did not understand FTX or the crypto asset markets in which it operated.” It did not understand FTX's relationship with Bankman-Fried's hedge fund Alameda Research.

The prosecutors stated that Bankman-Fried robbed $8 billion from FTX customers to plug losses at Alameda. (FTX collapsed in November 2022 and filed for bankruptcy).

In a statement, Gurbir Grewal, the SEC enforcement chief said that Prager Metis' audits deprived customers of "crucial protections" when investing. "They were defrauded out of billions of dollars by FTX and bore the consequences when FTX collapsed.”

The second settlement addressed charges that Prager Metis violated auditor independence rules between December 2017 and October 2020 in relationships with other clients.

Bankman-Fried, 32, is appealing his conviction and 25-year prison sentence over his role in FTX's collapse.

Meanwhile, Caroline Ellison, who had been Alameda's chief executive, pleaded guilty over her role and testified against Bankman-Fried, her former boyfriend. Her sentencing is scheduled soon, and she has requested a federal judge not to send her to prison.