The U.K. Financial Reporting Council (FRC) on Monday announced the start of an investigation into audit firm Crowe UK concerning the financial statements of Luxembourg-incorporated on-demand music streaming subscription company Akazoo.
The focus of the investigation is Crowe’s work on Akazoo’s financials for the fiscal years ended Dec. 31, 2016-18. The probe is being conducted by the FRC’s Enforcement Division.
The agency offered no further details in its press release.
Of note, Akazoo was sued for securities fraud by the U.S. Securities and Exchange Commission (SEC) in September 2020. The lawsuit was filed just over a year after the company went public following a special purpose acquisition company (SPAC) merger with Modern Media Acquisition Corp. (MMAC). Shortly after the SPAC deal, Akazoo was the subject of a short-seller report that alleged it was a fraud.
In May 2020, Akazoo disclosed in a filing with the SEC that an investigation into the allegations “determined that former members of Akazoo’s management team and associates defrauded Akazoo’s investors, including the predecessor SPAC acquiring entity [MMAC], by materially misrepresenting Akazoo’s business, operations, and financial results as part of a multi-year fraud.”
Akazoo added certain of its financial statements “should no longer be relied upon due to the possibility that such financial statements contain material errors.” The company revealed its investigation concluded it “had only negligible actual revenue and subscribers for years and that former members of Akazoo management and associates participated in a sophisticated scheme to falsify Akazoo’s books and records, including due diligence materials provided to MMAC and its legal, financial, and other advisors in connection with the Akazoo business combination in 2019.”
Akazoo was delisted by Nasdaq in June 2020.