Crypto exchange FTX filed for Chapter 11 bankruptcy protection on Friday with an eleven-figure hole in its books. As observers remarked on the rapid deterioration of then-CEO Sam Bankman-Fried’s trading empire, a natural question emerged: Who was FTX’s auditor?
FTX Trading LLC, the exchange’s international arm, worked with auditing firm Prager Metis, according to financial statements seen Friday by CoinDesk. The mid-sized firm lists 24 operating locations on its website, including the “metaverse.”
A now-deleted post on the company’s website, published in June 2022 said Prager Metis was “proud to support FTX US.” (The page was still viewable in Google’s search cache.)
The 2020 and 2021 FTX US audits were performed by New York City-based firm Armanino, according to documents viewed by CoinDesk.
A cursory internet search reveals Prager Metis provides tax, auditing and advisory services, notably to the entertainment and music industries, though it has no clients named on its website. It also surfaces more spicy fare: The company announced plans to open an office in the Decentraland metaverse in February 2022, and will sponsor an upcoming metaverse party for the scantily clad Decentraland Babydolls.
On its website, FTX said it had successfully undergone a U.S. GAAP financial audit for 2021.
As FTX ran into trouble this week, many critics pointed to FTX’s opaque business operations and how a lack of oversight may have allowed Bankman-Fried and his inner circle of executives to conceal possibly fraudulent behavior.
“I don’t know anything about FTX,” said Jerry Eitel, the partner emeritus and chief metaverse officer at Prager Metis. “I’m retired,” Eitel added, before disconnecting on the phone. (Eitel is a one-time CoinDesk contributor.) The head of Prager Metis’ audit practice could not be reached for comment.
Venture capital giant Sequoia, which wrote off the entirety of its $150 million investment in FTX this week, justified its investment in the company by citing FTX’s strong 2021 financials. The venture fund touted FTX’s $1 billion in revenues and $250 million in operating income as evidence of the company’s legitimacy, both figures CoinDesk’s leaked Prager Metis reports corroborate.
“At the time of our investment in FTX, we ran a rigorous diligence process,” the team wrote in a letter to investors.
Spokespeople for FTX and FTX US did not respond to a request for comment. The people did not respond when asked if the firm, M Group Strategic Communications, was still representing the company.
Additional reporting by CoinDesk’s Ian Allison.
UPDATE (Nov. 11, 21:25 UTC): Updates text in third paragraph and adds picture showing what accounting firm’s FTX website looked like before it was deleted.