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The United States Securities and Exchange Commission (SEC) is now in legal tussle with Prager Metis, an accounting company. The primary reason is that the firm's involvement with the cryptocurrency exchange FTX prior to the latter declaring bankruptcy.
On September 29, the SEC pointed out that Prager Metis dabbled in both auditing and accounting for its clientele, a move that stands in violation of the guidelines which demand distinct separation of these services.
The SEC's contention is rooted in the intertwined delivery of these services by Prager Metis for close to three years. The regulatory body stressed that such commingling of tasks could have possibly resulted in several independence violations, touching a number as high as "hundreds" within that timeframe.
Historical records indicate FTX had once onboarded Prager Metis for auditing its branches, FTX US and FTX, sometime during 2021. Things took a downturn when FTX made a bankruptcy announcement in November 2022. There were ripples in the industry when Sam Bankman-Fried, FTX's previous CEO, shared the findings of past audits. This act, in the eyes of many, was an attempt to restore faith in the company.
However, red flags had been raised about the content and credibility of the data in the FTX audit documents. Fast forward to January 25, when FTX's present CEO, John J. Ray III, communicated his significant misgivings about the presented data in these statements to a bankruptcy court.
Political corridors weren't silent either. Senators Elizabeth Warren and Ron Wyden voiced apprehensions regarding Prager Metis' neutrality, hinting that the firm might be leaning favorably towards the crypto sector.
Adding another layer to the drama, Fenwick & West, a legal entity that once served FTX, is under the scanner. Recent legal documents, dated September 21, suggest the law firm might share responsibility for FTX's downfall.
The bone of contention lies in the nature and extent of services they rendered to the exchange. But, in defense, Fenwick & West stand firm, arguing their conduct was strictly within the framework of representing their client.
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