Prager Metis has agreed to pay a total of $1.95 million to settle allegations of negligence and misconduct brought by the U.S. Securities and Exchange Commission (SEC), including failure to perform an audit of FTX in accordance with generally accepted auditing standards (GAAS). The firm was accused of failing to adequately assess its ability to audit FTX and causing a series of audit failures by being too hasty to accept FTX as a client. In addition, Prager Metis agreed to a permanent injunction and to hire an independent consultant to overhaul its audit and quality control policies. The agreement is subject to court approval.

Key Points

- Prager Metis agreed to pay $745,000 to settle allegations of improper audit practices against FTX.

- The SEC charged Prager Metis with violating auditor independence rules between 2017 and 2020 and will pay $1.2 million to resolve the allegations.

- The audit report provided by the firm allegedly falsely stated that it followed generally accepted auditing standards (GAAS).

- The SEC believes that Prager Metis lacked the ability to assess and the resources to conduct the FTX audit.

- Prager Metis was anxious to accept FTX as a client, which prevented the team from conducting an effective audit.

- Prager Metis failed to fully understand the relationship between FTX and Alameda Research LLC.

- Prager Metis will impose a permanent ban and work with independent compliance consultants to improve audit policies.