US regulator shuts down Trump Media auditor over ‘massive fraud’

The US Securities and Exchange Commission (SEC) has shut down the auditor of Donald Trump’s social media company, accusing it of “massive fraud”.

The US regulator charged the firm, BF Borgers, and its founder, Ben Borgers, on Friday with falsely representing to clients that its audit work would comply with US standards, and fabricating documentation.

It said Mr Borgers, one of the most prolific auditors of US public companies, was responsible for “one of the largest wholesale failures by gatekeepers in our financial markets”.

Without admitting or denying the SEC’s findings, the firm has agreed to pay a $12 million (€11.15 million) penalty and Ben Borgers to pay $2 million. Mr Borgers did not immediately respond to a request for comment.

BF Borgers has expanded rapidly to become auditor to hundreds of small and microcap companies – including the former US president’s Trump Media & Technology Group – but the SEC said that three-quarters of its audits were faulty.

The agency said it was stepping in to permanently close what it called a “massive fraud” and “sham audit mill”, and it told Borgers’ clients they would need to check past financial statements in case they contained errors. The firm’s “deliberate and systemic failure” to meet professional standards affected more than 1,500 company filings, the SEC said.

Mr Borgers built the eighth-largest client list of any US audit firm in just 15 years while still operating out of a single-storey building in a suburb of Denver, Colorado. Its latest regulatory filing showed it had just 50 staff, 10 of whom are certified public accountants. Mr Borgers himself signed off on more than 140 audit opinions in the past year, according to Ideagen Audit Analytics – far more than any other accountant in the US.

Regulators have been raising increasingly loud warnings about the quality of his work.

His firm was found to have a 100 per cent deficiency rate in audits inspected by the Public Company Accounting Oversight Board, the Colorado state board of accountancy fined him $5,000 earlier this year for bad audits of retirement plans, and Canada’s audit regulator barred BF Borgers from operating in that country last year.

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The SEC’s order barring the firm from public auditing leaves more than 170 US public companies searching for new accountants, an issue that appeared to hit some share prices on Friday.

“Trump Media looks forward to working with new auditing partners in accordance with today’s SEC order,” the company said.

The regulator said it would monitor the situation and advised companies they were entitled to limited extensions for filing their financial results if needed.

“Reports that were filed before the date of the order do not necessarily need to be amended solely because of the … order,” the SEC said, but it added: “Issuers should consider whether their filings may need to be amended to address any reporting deficiencies arising from the BF Borgers engagement.”

– Copyright The Financial Times Limited 2024