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Friedman

Friedman, Former Tether’s Auditing Firm, Faces Over $1.6 In Penalty By SEC

Kent Tenix
by Kent Tenix
2 years ago
·
Posted in SEC
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

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.

Related Reading: FTX President Joins Crypto Executives Stepping Down From Their Position

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. 

USDTUSD
USDT’s price is currently hovering above 1 USD. | Source: USDTUSD price chart from TradingView.com

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.  

Related Reading: Celsius Network CEO Resigns Following Bankruptcy Filing

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
Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Kent Tenix

Kent Tenix

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Kent is a talented freelance writer and journalist who creates insightful and thought-provoking content. With over 5 years of experience, she has honed her skills and established herself as an expert in her field. Kent is especially passionate about in-depth reporting and investigative journalism. She thoroughly researches every topic and story she covers to provide readers with comprehensive information and perceptive analysis. Whether she's reporting on politics, business, technology, or culture, Kent prioritizes accuracy, nuance, and integrity. Her goal with every piece is to inform readers and inspire meaningful conversations and positive change. Kent enjoys traveling, photography, and spending time with her family when she's not tirelessly conducting interviews or poring over data. She hopes to continue using her writing to enlighten and engage audiences on issues that matter.

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