What If Your Broker
Goes Bankrupt?
It happens more than you think. 23 forex brokers have failed in the last 5 years. Know what happens to your funds and how to protect yourself.
What Happens When a Broker Fails?
The process from failure to fund recovery
When a forex broker becomes insolvent (unable to pay its debts), a specific legal process begins. What happens to your money depends entirely on two factors:
- Whether the broker was properly regulated
- Whether your funds were held in segregated accounts
Regulated Broker Failure (Best Case)
If your broker was regulated by a major authority (FCA, ASIC, CySEC), here's what happens:
- Trading is suspended immediately
- An administrator is appointed by the court
- Client funds in segregated accounts are identified
- Compensation scheme (FSCS, ICF) is activated
- Funds are returned to clients (up to scheme limits)
- Remaining funds distributed from broker assets
Unregulated Broker Failure (Worst Case)
If your broker was unregulated or offshore:
- Funds may not be segregated at all
- No compensation scheme applies
- Legal proceedings may be in foreign jurisdiction
- Recovery rate: often 0-30%
- Process can take years
Typical Broker Failure Timeline
🚨 Broker Suspends Trading
Platform goes offline or trading is halted. Withdrawals blocked.
📢 Official Announcement
Regulator confirms insolvency. Administrator appointed.
📋 Client Registry
Administrator identifies all clients and their balances.
💰 Segregated Funds Identified
Client money in segregated accounts is ring-fenced.
📝 Claims Process
Clients submit claims to compensation scheme.
✅ Funds Returned
Compensation paid up to scheme limits. Remaining funds distributed later.
Real Broker Failures: Case Studies
What actually happened and how much clients recovered
Alpari UK
2015What happened: Swiss National Bank removed EUR/CHF floor. Alpari UK suffered massive losses on client positions and became insolvent.
Outcome: All client funds were recovered because they were properly segregated. FSCS covered any shortfall up to £85,000.
MF Global
2011What happened: $1.6 billion in client funds was misused by the company. Major scandal revealed segregation rules were violated.
Outcome: After lengthy legal process, most clients recovered funds. CEO faced criminal charges. Led to tighter US regulations.
FXCM UK Restructure
2017What happened: FXCM US was banned by CFTC. UK entity was acquired by Leucadia. Orderly transition of clients.
Outcome: No client lost any money. Accounts transferred smoothly. Shows how regulation protects even in major corporate events.
Typical Unregulated Failure
CommonWhat happens: Website disappears overnight. No administrator appointed. Owners unreachable. Funds transferred to unknown accounts.
Outcome: Victims file police reports but rarely recover funds. No compensation scheme. The stark reality of trading unregulated.
What to Do If Your Broker Fails
Immediate steps to maximize your recovery
Don't Panic - Document Everything
Screenshot your account balance, open positions, transaction history, and any communications. This evidence will be crucial for claims.
Check the Regulator's Website
Look for official announcements. The regulator will provide guidance on the claims process and timeline.
Register with the Administrator
An insolvency practitioner will be appointed. Register as a creditor to be included in the distribution of funds.
File a Compensation Claim
If eligible (FCA → FSCS, CySEC → ICF), submit your claim as soon as the process opens. Gather all documentation.
Contact Your Bank
If you deposited via credit card, initiate a chargeback claim within 120 days. Bank transfers are harder but report it as fraud.
Beware of Recovery Scams
CRITICAL: Scammers target victims of broker failures, offering to "recover" funds for an upfront fee. This is ALWAYS a secondary scam. No legitimate service charges upfront fees for fund recovery.
How to Protect Yourself Before It Happens
Prevention is better than recovery
Choose Tier 1 Regulation
FCA, ASIC, CFTC brokers offer the best protection. Compensation schemes up to £85,000.
Verify Segregated Accounts
Ensure the broker holds client funds in segregated accounts at tier-1 banks.
Check Financial Health
Public companies publish financial statements. Look for profitability and capital reserves.
Monitor News
Follow industry news. Warning signs (regulatory actions, fines, complaints) often appear before failure.
Don't Over-Deposit
Keep balances within compensation limits. Consider splitting large sums across multiple regulated brokers.
Test Withdrawals
Regularly withdraw profits. A broker that processes withdrawals quickly is a healthy sign.
Frequently Asked Questions
How often do forex brokers fail?
More often than you'd think. About 3-5 significant broker failures occur globally each year. However, failures of well-regulated brokers are rare and usually handled smoothly.
Can I lose more than my deposit?
With regulated EU/UK/AU brokers, no - negative balance protection is required. With offshore brokers, theoretically yes, though enforcement is difficult.
What if my balance is above the compensation limit?
You'll receive the maximum compensation (e.g., £85,000) immediately. For the remainder, you become an unsecured creditor and may receive additional funds from the broker's asset liquidation.
How long does recovery take?
For regulated brokers: 3-12 months typically. Simple claims can be faster (FSCS aims for 7 days). Unregulated failures can take years with little recovery.
Should I hire a lawyer?
For regulated broker failures with compensation schemes, usually not necessary. For larger claims or unregulated situations, legal advice may help but rarely changes outcomes significantly.
Are my open trades protected?
Open positions are typically closed at the market price at time of failure (or last available price). The resulting balance is what's protected by compensation schemes.
Choose Brokers You Can Trust
Browse our verified list of properly regulated brokers