FTX’s auditor, Prager Metis, is now facing heavy scrutiny for its involvement with the cryptocurrency exchange. According to The Financial Times, the U.S. Securities and Exchange Commission (SEC) has charged the firm with failing to grasp the crypto market dynamics, particularly FTX’s relationship with its hedge fund, Alameda Research. This misstep led to a series of auditing failures, all while the firm gave FTX a clean bill of health before its collapse.
Auditors Miss the Mark
In a rush to secure FTX as a client, Prager Metis didn’t adequately scrutinize the ties between FTX and Alameda Research, according to the SEC. The audit firm “failed to appreciate the risks posed by FTX’s interconnected financial dealings,” SEC Enforcement Director Gurbir Grewal noted, stressing the importance of thorough audits. Prager Metis settled the charges with a $745,000 penalty but didn’t admit wrongdoing.
A Warning to Auditors
The settlement includes restrictions on Prager Metis’ future business, serving as a warning to audit professionals across the industry. As Grewal pointed out, auditors must exercise “due professional care and skepticism” to protect investors. This case shows us the critical role auditors play in safeguarding investor interests, especially in fast-evolving sectors like crypto.
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