US SEC charges FTX’s former auditor over independence violations

The U.S. Securities and Exchange Commission on Friday said it has charged accounting firm Prager Metis, which previously did audit work for the FTX Group, with hundreds of auditor independence violations.

Between December 2017 and October 2020, Prager Metis improperly added indemnification provisions to engagement letters to clients for more than 200 audits and other work, the SEC said. This prevented the firm from having the independence required by law, the regulator said.

Lawyers for the international accounting firm did not respond immediately to calls for comment.

Even after senior partners at the firm were alerted to the issue, Prager Metis continued to sign engagement letters with those provisions, the SEC said.

Prager Metis was one of the auditors for the FTX Group, according to a court filing. Crypto exchange FTX filed for bankruptcy in late 2022 and the U.S. government later accused the firm, its founder and key executives of a sweeping fraud scheme. Founder Sam Bankman-Fried’s trial begins next week.

The SEC’s lawsuit against Prager Metis CPAs and its professional services firm was filed in the U.S. District Court for the Southern District of Florida.

The agency said it is seeking an injunction and penalties, among other things, and its investigation into Prager Metis is ongoing.