SEC initiates legal action against FTX’s auditor

The United States Securities and Exchange Commission (SEC) has begun legal proceedings against an accounting company that had supplied services to cryptocurrency exchange FTX prior to its insolvency declaration.According to a September 29 declaration, the SEC alleged that accounting firm Prager Metis provided auditing services to its customers without preserving the necessary self-reliance, as it continued to use accounting services. This practice is prohibited under the auditor self-reliance framework.Extract from the SECs September 29 statement. Source: SECTo prevent disputes of interest, accounting and audit jobs should be kept clearly different. Nevertheless, the SEC claims that these braided activities spanned over a period of roughly three years:” As alleged in our complaint, over a period of almost 3 years, Pragers audits, reviews, and exams fell short of these basic concepts. Our problem is a crucial suggestion that auditor independence is important to investor defense.” While the declaration doesnt explicitly discuss FTX or any other clients, it does highlight that there were allegedly “hundreds” of auditor independence infractions throughout the three-year period.Furthermore, a previous court filing pointed out that the FTX Group engaged Metis to investigate FTX US and FTX eventually in 2021. Consequently, FTX declared insolvency in November 2022. The filing alleged that since former FTX CEO Sam Bankman-Fried publicly announced previous FTX audit results, Metis needs to have recognized that its work would be utilized by FTX to boost public trust.Related: FTX founders plea for momentary release should be denied, prosecution saysConcerns were previously reported about the product provided in FTX audit reports.On Jan. 25, present FTX CEO John J. Ray III informed a personal bankruptcy court that he had “substantial issues regarding the details presented in these audited monetary declarations.” Furthermore, Senators Elizabeth Warren and Ron Wyden raised issues about Prager Metis impartiality. They argued that it functioned as a supporter for the crypto industry.Meanwhile, a law practice that offered services to FTX has actually come under scrutiny in current times.In a Sept. 21 court filing, complainants declare that U.S. based law office, Fenwick & & West, ought to be held partly responsible for FTXs collapse because it apparently exceeded the norm when it concerned its service offerings to the exchange.However, Fenwick & & West asserts that it can not be held liable for a customers misbehavior as long as its actions remain within the bounds of the customers representation. Publication: Blockchain investigators: Mt. Gox collapse saw birth of Chainalysis