The Akazoo Scandal: SEC Charges Crowe U.K. LLP and Key Executives for Deficient Audit Practices


The SEC has filed claims against Crowe U.K. LLP, a prominent London-based audit firm, its CEO, Nigel Bostock, and senior auditor, Matthew Stallabrass. The charges stem from the firm’s alleged inadequate audit of Akazoo Limited, a notable music-streaming company. This exposé sheds light on the critical details surrounding the case and the repercussions it holds for the world of financial audits and market integrity.

The Clean Audit Report That Concealed the Truth

The SEC’s investigation unearthed a startling revelation: Crowe U.K. LLP had issued an ostensibly clean audit report for Akazoo’s 2018 financial statements. However, this façade crumbled when Akazoo’s public debut via a merger with a special purpose acquisition company (De-SPAC transaction) in September 2019 brought to light a stark disparity. The 2018 financial statements, which had claimed a substantial $120 million in revenue, were proven false, as Akazoo’s actual revenue stood at negligible levels.

Blurred Standards and Oversight Negligence

The SEC’s findings are deeply concerning, exposing the discrepancies in Crowe U.K.’s audit practices. The audit team’s purported adherence to Public Company Accounting Oversight Board (PCAOB) standards was contradicted by their lack of experience and training in these very standards. Disturbingly, the team failed to raise red flags even when presented with fabricated agreements and inauthentic confirmation letters by Akazoo. This negligence highlights the absence of due professional care and skepticism, reflecting a systemic failure within the audit process.

Misleading Claims and Professional Misconduct

The audit report produced by Crowe U.K. LLP further amplified the deception. The claim that Akazoo’s financial statements for 2018 were fairly presented in all material respects was demonstrably false. This deliberate misrepresentation not only eroded the credibility of the audit but also played a role in perpetuating the illusion of financial soundness that allowed Akazoo to enter the public market.

Accountability of Key Individuals

Nigel Bostock, the engagement partner for the Akazoo audit, bears a significant share of responsibility. His failure to adequately supervise the engagement, maintain proper documentation, and exercise due professional care is a glaring lapse. Similarly, Matthew Stallabrass, as the engagement quality reviewer, also fell short in conducting an adequate engagement quality review. These shortcomings underscore the pivotal role that effective oversight and quality assurance play in ensuring accurate financial reporting.

Implications for Market Integrity

Eric Werner, the Regional Director of the Fort Worth Regional Office, highlighted the broader impact of Crowe U.K.’s lapses. By failing to perform a thorough audit of Akazoo, the firm inadvertently contributed to the credibility of Akazoo’s public listing, perpetuating a culture of legitimacy that facilitated the company’s entrance into the public markets. This emphasizes the critical role of auditors as gatekeepers of financial transparency and underscores the need for stringent accountability measures.

Settlement and Penalties

Crowe U.K., Bostock, and Stallabrass, while not admitting or denying the SEC’s findings, have chosen to settle the charges. Crowe U.K. will pay penalties of $750,000, Bostock $25,000, and Stallabrass $10,000, respectively. Additionally, they have agreed to cease and desist from violations of the proxy and reporting provisions of the Exchange Act and Regulation S-X. Crowe U.K. has also consented to censure, disgorgement, and prejudgment interest, with its payments deemed satisfied through related private litigation. The firm will voluntarily withdraw its PCAOB registration and implement measures to ensure due diligence in accepting new clients. Bostock and Stallabrass will face suspension from appearing or practicing before the SEC as accountants, with a possibility of reinstatement after five and two years, respectively.

Securities Attorney at Sallah Astarita & Cox | 212-509-6544 | | Website | + posts

Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.

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