U.S. watchdog should step up oversight of crypto auditors, say Democratic senators

January 27, 2023

U.S. Democratic Senators Elizabeth Warren and Ron Wyden are calling on the country's accounting watchdog to increase oversight of firms that audit cryptocurrency companies in the wake of the collapse of crypto exchange FTX.

In a letter to the U.S. Public Company Accounting Oversight Board (PCAOB) made public on Thursday, Warren and Wyden questioned the agency, which oversees registered public accounting firms around the world, as to why auditing firms working with FTX failed to identify corporate mismanagement and the lack of internal controls that federal prosecutors have alleged.

“When PCAOB-registered auditors perform sham audits – even for firms that may lay outside of the PCAOB’s jurisdiction – they tarnish the credibility of the PCAOB," Warren and Wyden wrote.

A PCAOB spokesperson confirmed the board had received the letter and said it would respond to the lawmakers directly.

"We look forward to working with them on our shared goal of protecting investors," the spokesperson said.

U.S. prosecutors in Manhattan have accused FTX founder and former Chief Executive Officer Sam Bankman-Fried of stealing billions of dollars in customer funds to plug losses at his hedge fund, Alameda Research. Bankman-Fried has previously acknowledged risk-management failures at FTX but has said he does not believe he has criminal liability.

Prior to its collapse and subsequent bankruptcy filing in November, FTX said it had undergone audits by PCAOB-registered firms Armanino and Prager Metis. Representatives for Armanino and Prager Metis did not immediately respond to requests for comment.

[Reuters]