FTX Collapse Puts Auditors in Crosshairs of Clients, Regulators

A lawsuit against FTX’s auditors highlights potential legal risks the audit firms face for vetting the failed cryptocurrency exchange’s books.

Prager Metis CPAs LLC and Armanino LLP were “willfully blind” to a pattern of “racketeering” at FTX, a customer who allegedly lost $20,000 said in a Nov. 23 lawsuit in San Francisco federal court. The suit is expected to be the first of many as investors and regulators pore over the wreckage of the company to assign blame for billions of missing customer and creditor dollars.

As the gatekeepers of the company’s financials, the auditors could be an easy target ...