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Donald Trump’s social media company scrambled to find a new auditor after its first pick resigned after just a few months on the job, according to people familiar with the matter.
Trump Media & Technology Group engaged WithumSmith+Brown to check its financial statements shortly after the company was founded in 2021, but by the end of the year the accounting firm had decided it did not want to be associated with a business venture by the former US president, these people said.
The resignation explains why TMTG floated on the stock market this year with a much smaller audit firm than would typically be used by such a high-profile company.
TMTG is instead using BF Borgers, an accounting firm that is run from a single-storey building in a suburb of Denver and has been repeatedly criticised by regulators for the poor quality of its audit work. Borgers was engaged on January 22 2022 for a fee of $150,000 for the first annual audit, according to an internal document seen by the Financial Times.
Withum’s resignation came at a time of mounting scrutiny on the former president’s business affairs. New York’s attorney-general had launched a civil investigation that led to the indictment and conviction of the Trump Organization for fraud. Mazars, the Trump Organization’s longtime auditor, said in February 2022 that a decade of Trump Organization financial statements should no longer be relied upon.
TMTG itself was also in the crosshairs of the authorities, as the Securities and Exchange Commission in December 2021 investigated trading in shares of the cash shell through which it planned to go public. Tensions between the Trump family and co-founders of TMTG in that first year are also the subject of civil litigation.
Shares in TMTG have been volatile since it finally went public via the cash shell merger last month. Its popularity with retail investors and traders — including fans of the former US president — briefly sent the lossmaking company’s valuation rocketing to about $14bn before falling back.
The stock dropped another 18 per cent on Monday, after the company signalled some of its early financial backers were preparing to exercise warrants and sell shares. TMTG’s valuation was below $6bn on a fully diluted basis accounting for warrants and other instruments.
Every public company is required to have its financial statements signed off by a regulated auditor who acts as a check against mistakes or outright fraud. Auditors, by turn, are required to have rigorous client acceptance procedures to determine whether they are comfortable taking on a particular company.
Withum declined to comment on the reasons for its resignation.
BF Borgers has targeted small- and microcap companies unwilling or unable to engage larger, more expensive firms, and has built the eighth-largest client list of any US audit firm despite having a staff of only 10 certified public accountants. Regulators have warned that it has taken on work faster than it can manage.
The FT reported earlier this month that the firm has one of the worst inspection records among the hundreds of audit firms overseen by the Public Company Accounting Oversight Board in the US. It has also been barred from taking on new clients in Canada for failing to meet professional standards in public company audits there, and founder Ben Borgers has been censured in Colorado over the poor quality of audits of some retirement plans.
In a previously unreported development, BF Borgers has also been thrown out of the accounting profession’s own inspection programme in the US, a peer review system run by the American Institute of Certified Public Accountants. Reviewers found multiple instances of the firm failing to meet professional standards in its audit work.
“The firm was found to be so seriously deficient in its performance that education and remedial, corrective actions are not adequate,” the AICPA concluded in November.
BF Borgers did not return messages seeking comment. TMTG said: “Apparently, the Financial Times’ business model is to charge its subscribers $75 per month for the privilege of reading outdated stories touting irrelevant information.”
