SEC Targets Prager Metis Over FTX Audit Failings: What This Means For Crypto Oversight

The U.S. Securities and Exchange Commission (SEC) has taken legal action against Prager Metis, the erstwhile auditor of the cryptocurrency exchange FTX FTT/USD accusing him of professional misconduct and non-compliance with the standards set by the Public Company Accounting Oversight Board (PCAOB) during its audit of FTX's financial statements for the fiscal years 2021 and 2022.

This development comes just weeks ahead of Benzinga's Future of Digital Assets conference scheduled for Nov. 14. The conference, which aims to shed light on the evolving landscape of digital assets, will likely address the increasing scrutiny and regulatory challenges faced by entities operating within the crypto space.

According to the SEC's complaint, Metis lacked the requisite professional skepticism and did not gather adequate audit evidence.

Such oversights led to the firm's failure to spot and rectify material misstatements in FTX's financial records.

The SEC further claims that the auditor neither sufficiently gauged the risks of material misstatement arising from potential fraud nor designed apt responses to these risks.

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The regulatory body also emphasized Metis' shortcomings in evaluating the validity of significant assumptions and data that FTX employed in its fair value measurements.

Furthermore, the auditor is alleged to have not procured enough evidence to back its opinion on the robustness of FTX's internal controls over financial reporting.

The commission is seeking a permanent injunction, civil penalties, and an order directing Metis to adopt measures to avert future infringements.

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