New developments in the bankrupt cryptocurrency exchange FTX attracted attention. The US Department of Justice announced that FTX customers will testify in the ongoing trial. On the other hand, the US SEC filed a lawsuit against the company that audits FTX. Here are the details…
FTX customers will testify
In a legal showdown that could shape the future of cryptocurrency exchange FTX and its former executive Sam Bankman-Fried, the Department of Justice (DOJ) is preparing to call former FTX customers, investors and staff as witnesses in an upcoming trial. These witnesses will provide important information about FTX’s treatment of customer assets and interactions with Bankman-Fried. A witness located in Ukraine, known as “FTX Client-1,” is experiencing travel difficulties due to the ongoing conflict. He may testify via video conference. But Bankman-Fried’s defense has yet to approve that motion, adding a layer of complexity to the case.
Bankman-Fried’s legal team, led by attorney Mark Cohen, expressed concern about the jury questions proposed by the Justice Department. They argue that these questions can imply guilt and undermine the presumption of innocence. Moreover, some questions may unintentionally change the jury’s perspective and jeopardize the impartiality of the case. With jury selection scheduled to begin on October 3, followed by a trial, all eyes are on this high-stakes legal battle that underscores the broader importance of fair trials in the cryptocurrency industry.
SEC files lawsuit against Prager Metis, which provides services to crypto company
Separately, the United States Securities and Exchange Commission (SEC) has taken legal action against accounting firm Prager Metis, which provided services to cryptocurrency exchange FTX before declaring bankruptcy. The SEC alleges that Prager Metis failed to maintain the required independence in providing audit services, which violated auditor independence regulations. The SEC’s complaint notes that Prager Metis’ audits, inspections and examinations allegedly fell short of fundamental principles for nearly three years. Although FTX is not specifically named in the complaint, it highlights “hundreds” of auditor independence violations during this period.
It had previously been revealed that Prager Metis had audited FTX, which raised concerns about the reliability of the audit reports. Senators Elizabeth Warren and Ron Wyden also expressed concerns about the firm’s impartiality and claimed that it acted as an advocate for the cryptocurrency industry. Meanwhile, another law firm, Fenwick & West, has come under scrutiny for its services to FTX. Because the plaintiffs claimed that FTX should be partially responsible for its collapse. Fenwick & West argues that it cannot be held liable for a client’s misconduct as long as it operates within the boundaries of the agency.
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