The fall of FTX could not have happened without the SBF fraud – or the failure of the Prager Metis audit

Auditing standards require, at a minimum, that auditors understand the entity and its environment, that it has the competence and independence to perform the audit, and that the audit staff cannot effectively, among other things. These standards apply whether the audit client is a first-time client, a small local shop, or a multi-billion dollar cryptocurrency exchange with an affiliate trading firm.

New York-based Prager Metis has rushed into the latter space with abandon. The firm was the first to announce a metaverse headquarters in Decentraland. The company took over FTX as a client. Apparently it wanted to be seen as the accounting firm of the future. And yet, as the SEC required, he lacked the basic understanding and competence to audit the industry.