In a recent development, the SEC has reached an agreement with the auditing firm Prager Metis, which was previously involved with FTX Derivatives Exchange before its collapse. The company was under scrutiny for its failure to effectively audit FTX’s financial records to detect potential inconsistencies.
Many experts in the cryptocurrency industry criticized the SEC for inadequate oversight, attributing it to FTX’s downfall. As part of its efforts to address these criticisms, the SEC sought closure with individuals and entities connected to FTX’s demise, leading to the involvement of Prager Metis.
The SEC accused Prager Metis of inaccurately representing FTX’s financial status and failing to comply with auditing standards during a specific period. The firm was also faulted for not disclosing the increased risk associated with FTX’s relationship with Alameda Research, resulting in charges of negligence-based fraud.
Following the settlement, Prager Metis agreed to pay $1.95 million to resolve allegations of misconduct related to its audits of the defunct crypto trading platform and violations of auditor independence. This includes a civil penalty of $745,000, combined civil penalties totaling $1 million, and combined disgorgement with prejudgment interest amounting to $205,000.
The settlement with Prager Metis comes after the SEC imposed a $750,000 fine on Flyfish Club NFT for breaching securities laws by selling unregistered NFTs. The club intended for the digital collectibles to provide exclusive access to a high-end dining establishment, but the SEC deemed them securities due to their potential for resale and passive income earning opportunities.
While the SEC’s actions have been criticized by Commissioners Mark Uyeda and Hester Peirce, who believe the agency is overly focused on cryptocurrencies, the crackdown on FTX’s auditor and Flyfish Club’s NFT activities reflects the regulatory body’s intensified scrutiny over the crypto industry.