The U.S. Security and Exchange Commission (SEC) sued and set charges of 1 million USD as a monetary penalty against Friedman LLP, the former auditing firm of Tether. Although the stablecoin issuer Tether hired the same auditing company from May 2017 to January 2018, the case filed last week does not count it.
It has been over a year since the growing crypto issues have pushed the global financial watchdogs to ramp up their efforts to ensure users’ protection. Particularly, the previous year’s collapse of stablecoin, Terra USD, affected the market widely and triggered probing in crypto-oriented platforms.
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Friedman LLP Performed Sloopy Audits In Two Companies
Per the SEC order published on Monday, the investigations found the New York-based auditing firm featured improper “professional conduct” and operated outside the “federal security laws.”
Notably, Friedman LLP has agreed to pay a monetary fine of $1 million alongside the extra penalties against disgorgement and “pre-judge interest,” settling the deal in over $1.6 million in total. Moving ahead, the auditing firm will be censured to ensure that proper professional training is being conducted in line with the settlement.
The order reveals auditing company’s accounting practices were not transparent from 2015 to 2020, and it could not maintain security to tackle “fraud risks.” Gov officials have caught up the Friedman’s auditor making false statements while conducting audits of a Chinese grocery chain, iFresh, and a second anonymous company. The auditor lied that he proceeded in line with the rules of the Public Company Accounting Oversight Board (PCAOB).
The order affirmed,
Friedman also failed to obtain sufficient appropriate audit evidence, respond to fraud risks, and perform procedures to identify related party transactions during its audits of iFresh.
Worthnotingly, Tether, running multiple legal disputes at the time, dissolved its partnership with the defendant company around seven months after collaboration, alleging that FiredmanLLP was unable to conduct audits in a required timeframe.
Reserve Legacy Of Tether Still In Question
At the latest in the legal barriers to Tether, a judge at Northern District Court New York has ordered the stablecoin issuer on September 19 to submit proper filings proving the backing assets of its native coin USDT. The new order followed Tether’s case of 2019 when a group of investors accused the firm of manipulating Bitcoin price by purchasing its large quantity with un-backed USDT.
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As per the allegations, the USDT was not backed 1:1 against the U.S. dollar for some time. Hence, in the settlement with the New York Attorney General in February 2021, Tether agreed to publish regular reports of its reserves and closed the investigations by paying $18.5 million.
But, the new order comes upon the plaintiffs’ request to ask the firm to provide a deep picture of its reserve. The plaintiffs, in return, urged it may have negative impacts on the platforms to public its sensitive financial information. But, the Judge replied documents the plaintiffs seek are “undeniably important.”
Featured image from Pixabay and chart from TradingView.com