The United States Securities and Exchange Commission (SEC) has taken legal action against Prager Metis, the auditor of the now-bankrupt cryptocurrency exchange FTX, for compromising their independence from their clients and contravening federal securities laws.

The SEC alleges that Prager Metis added indemnification provisions to engagement letters for more than 200 audits, reviews and exams conducted between December 2017 and December 2020, without notifying their clients of this violation and despite being informed by the Public Company Accounting Oversight Board (PCAOB) that this breached independence requirements. This raises questions about the firm’s transparency and ethical conduct.

Prager Metis had also previously been accused by Senators Elizabeth Warren and Ron Wyden of lacking independence when auditing cryptocurrency companies. This case adds another layer of complexity to the issue.

Auditor independence is a cornerstone of trust in financial markets and the SEC’s legal action against Prager Metis is a reminder of the importance of adhering to auditor independence rules and the need for greater transparency in the financial auditing industry.

The implications of this case will be monitored closely by the cryptocurrency industry and the auditing firms that serve it. The outcome of the legal proceedings will be key in determining the extent of accountability and potential consequences for Prager Metis.