TheFTX collapseinvolvedfraudulent fund mismanagement, where FTX executives created a "backdoor" to allowAlameda Research (FTX’s sister trading firm) to borrow client funds without their consent.

The backdoor wasa hidden code in FTX’s system, allegedly created bySam Bankman-Fried, which allowed Alameda to accesscustomer depositswithout triggering alerts to auditors or compliance teams.

Alameda used these fundsfor risky trading strategies and investments, leading to the eventual collapse of FTX when a liquidity crunch exposed the missing funds.

Option A ("allowed a stablecoin to be removed from the ledger and added to the balance sheet")

Incorrect because FTX’s fraud involvedmisuse of customer funds, not just a stablecoin misclassification.

Option C ("allowed currency traders to smooth profits and conceal losses for over two years")

Incorrect because this sounds more likeLIBOR-rigging scandals, whereas FTX misappropriated client funds.

Option D ("allowed a rapid pace of acquisitions but poor integration of acquired companies")

Incorrect because FTX's collapse was due tofinancial fraud, not poor acquisition strategy.

Step 1: The "Backdoor" in FTXStep 2: Why the Other Options Are Incorrect

PRMIA Financial Crime Risk Management– Discusses insider risk and fraudulent misappropriation of funds.

FTX Collapse Reports– SEC, CFTC, and DOJ filings confirm that Alameda had unauthorized access to client funds.

PRMIA Risk References Used:

Final Conclusion:FTX’s backdoorenabled Alameda to take $65 billion in client funds without permission, makingOption B the correct answer.