End of Trump Media’s Auditor Jolts Hundreds of Other Companies

The sudden shutdown of what the SEC dubbed a “sham audit mill” will force hundreds of companies, including Trump Media & Technology Group Corp., to hunt for new auditors, scour old audits for potential problems, and scramble to meet public company regulatory deadlines.

The US Securities and Exchange Commission on Friday described widespread violations at BF Borgers CPA, hitting the firm and its founder with a total of $14 million in fines to settle the charges. The regulator detailed false work papers, meetings about client risks that never happened, and audits copied from previous years as the Lakewood, Colo.-based firm churned out audit after to audit to meet a surge of new clients.

Borgers had clients ranging from American Rebel Holdings Inc., a Nashville-based business that makes apparel and backpacks for concealed carry guns, to Eva Live Inc., an AI-focused digital advertising company in California.

All of them will need to find new auditors—fast—if they want to make their next quarter’s financial reporting deadlines in time. They have to alert the market that they no longer have an auditor by issuing a special 8-K financial form and will brace for scrutiny as new auditors question the work vetted by a firm that federal regulators said violated multiple rules.

“This will likely shut down a lot of companies, or make them go private,” said Shaun Donnelly, CEO of mixed martial arts entertainment company Lingerie Fighting Championship Inc., a BF Borgers client.

Donnelly, who plans to keep his business a public enterprise, said he learned about his audit firm’s shutdown from a reporter and would be seeking a new firm quickly. He won’t be alone.

Despite its small size, BF Borgers churned out hundreds of audits, the majority for clients that are traded over-the-counter, meaning they are too small or don’t meet the requirements to trade on a larger exchange. Expecting a wave of companies seeking answers, SEC staff accountants put out special guidance on Friday warning companies of their obligations when they no longer have an auditor.

Because BF Borgers is banned from practicing, any future 10-K annual reports or 10-Q quarterly financial filings cannot contain information that was vetted by that audit firm, the guidance says.

Filings published before Friday do not necessarily need to be amended, the SEC said, but companies should consider whether they’ll have to fix any “deficiencies arising from the BF Borgers engagement.”

Many companies are expected to miss SEC filing deadines, the agency warned. The staff reminded companies they can use a limited extension period to meet deadlines, but didn’t offer any time beyond that. SEC rules permit companies to file quarterly reports up to five days after their due date and annual reports up to 15.

Duke Pitts, president and CEO of Las Vegas-based nutritional supplement company Healthy Extracts Inc., which sells supplements including “ultimate brain nutrients,” said he’s “feverishly looking at other firms now” to replace Borgers. He said he hopes the SEC will give companies up to 60 days if possible to meet the deadline for 10-Q filings.

Pitts said he’s “100% confident” in his company’s accounting practices. “The biggest negative is the expense and the cost,” of finding a new auditor, he said.

The SEC’s guidance for Borgers’ clients is “unusual and dramatic, frankly,” said Jeffrey Johanns, accounting professor at the University of Texas McCombs School of Business. “I can’t think of this kind of thing happening since Andersen.”

The collapse of audit firm Arthur Andersen in 2002 after the Enron accounting scandal triggered an overhaul to US securities laws and the creation of the US audit watchdog, the Public Company Accounting Oversight Board. BF Borgers is nowhere near the size of Arthur Andersen, Johanns said, but its sheer number of clients meant the regulator had to issue a warning. The SEC in its order said it examined 369 audit clients from January 2021 through June 2023 and found flaws in three-quarters of them.

“The order really paints in painstaking detail how egregious Borgers was,” said Chris Vanover, president of audit advisory firm CPA Club and a former PCAOB staffer. “I don’t know if I’ve seen something just so blatantly foul.”

While the majority of companies on BF Borgers’ client roster—84%—trade over the counter, the firm last year ranked No. 8 on a list of audit firms with the most publicly traded clients, with just nine fewer clients than mid-tier firm BDO USA, according to research firm Ideagen Audit Analytics.

It secured its largest client, Trump Media Co., in 2022.

Trump Media “looks forward to working with new auditing partners in accordance with today’s SEC order,” a representative for the company told Bloomberg.

—With assistance from Clara Hudson.