Overview of SEC Settlement with Prager Metis
The U.S. Securities and Exchange Commission (SEC) reached a settlement with Prager Metis to resolve claims of negligence in its audits of the defunct crypto exchange FTX. Prager Metis agreed to pay $1.95 million to settle charges related to misleading reports created for FTX between February 2021 and April 2022. The SEC alleged that Prager Metis failed to adhere to generally accepted auditing standards, particularly in representing the increased risk associated with FTX’s ties to its sister hedge fund, Alameda Research.
Downfall of FTX and Sam Bankman-Fried
FTX, once considered one of the largest trading venues in the crypto industry, faced a significant downfall in 2022 due to falsified financial statements and the commingling of customer funds with corporate cash. This led to a liquidity crisis, prompting founder Sam Bankman-Fried to halt withdrawals before declaring bankruptcy. Following extradition to Manhattan, Bankman-Fried received a 25-year prison sentence. Despite this, he has appealed the decision, claiming judicial bias and denying intentional fraud against investors.
