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The FTX debacle looks to be coming to an end as the guilty parties are being punished for their crimes.

The Securities and Exchange Commission (SEC) announced that Prager Metis has agreed to pay $1.95 million to resolve two actions alleging misconduct in its audits of the current bankrupt crypto exchange, FTX, and violations related to the auditor independence.

After conducting a comprehensive investigation, the SEC alleges that Prager misrepresented its “compliance with auditing standards regarding FTX.” The two reports for FTX issued by Prager from Feb. 2021 to April 2022 falsely misrepresented that audits complied with Generally Accepted Auditing Standards (GAAS).

The SEC’s complaint alleges Prager failed to follow GAAS’s policies and failed to assess “whether it had the competency and resources to undertake the audit of FTX.” The inefficient reporting led to Prager failing to understand the risk stemming from the relationship between FTX and Alameda Research.

This led the SEC to charge Prager with “negligence-based fraud.” 

Prager agreed to the permanent injunctions to pay the fine and to undertake remedial actions without admitting or denying SEC’s charges. 

Gurbir S. Grewal, Director of the SEC's Division of Enforcement, stated: “Effective investor protection requires a collaborative approach that includes both regulators and gatekeepers, such as auditors.

“To fulfill their role, auditors must, among other things, be independent, exercise due professional care and skepticism, and comply with all applicable professional standards. As we allege in these enforcement actions, Prager Metis fell short in all of these areas.”

Additionally, Grewal pointed out Prager’s improper audits of FTX is one of the reasons that caused investors to bear the consequences when the crypto exchange fell. The latest action by SEC aims to enhance investor protection while warning audit professionals to meet their “gatekeeping obligations.”

Read more: FTX Executive Faces Severe Penalties, Prosecutors Urge