What Happens to Your Money if a Broker Goes Bust
If a broker fails, open positions are usually closed and the company goes into an insolvency process. Money held in properly segregated client accounts should be returned to clients, though slowly. Any shortfall is covered by a compensation scheme only if the company was in one, such as the UK's FSCS (up to £85,000) or Cyprus's ICF (up to €20,000). With an offshore broker you're usually an unsecured creditor waiting for what's left.
What happens, step by step
- Trading stops. The regulator or a court suspends the firm. Open positions are closed.
- Administrators or liquidators are appointed. They take control of the company and its accounts.
- Client money is identified. Funds in segregated client accounts are pooled and reconciled against client balances.
- Distribution. Client money is returned in proportion to claims, minus the cost of the process if the rules allow.
- Compensation. If client money is short and the firm belonged to a scheme, the scheme pays eligible clients up to its limit.
- Remaining claims. Anything still owed becomes a claim against the company’s other assets, ranked with other creditors.
Regulated vs offshore: the difference in practice
| UK / EU company | Offshore company | |
|---|---|---|
| Segregation | Required and supervised | Depends on the broker and its regulator |
| Compensation | FSCS up to £85,000; Cyprus ICF up to €20,000 (or 90% of the claim if lower) | None that we found on offshore regulators’ sites |
| Process | Domestic insolvency law, regulator involved | Local insolvency law in the offshore jurisdiction |
| Your position for any shortfall | Scheme pays first | Unsecured creditor |
The limits come from the FSCS and CySEC’s Investor Compensation Fund. The schemes don’t cover trading losses, only money the firm should have held for you. More in segregated funds and compensation.
Worked example
You hold $8,000 with a broker that fails. Liquidators find client money accounts can repay 70% of client balances.
- UK firm (failed after April 2019): you receive about $5,600 from client money, and the FSCS can cover the remaining eligible shortfall up to £85,000.
- Offshore firm: you receive about $5,600, eventually. The remaining $2,400 is an unsecured claim that may return little or nothing.
Warning signs before a failure
- Withdrawals slowing down for many clients at once
- Sudden changes in payment methods or the company you’re contracted with
- Licence suspended or withdrawn on the regulator’s register
- Aggressive deposit promotions while payouts stall
If you see these, withdraw what you can. The scam-check guide and withdrawal problems explain what’s normal and what isn’t.
Reducing your exposure
- Keep only trading capital with any offshore broker; withdraw profits regularly.
- Spread larger sums across brokers, or keep them with a tier-1 company (licences by tier).
- Prefer brokers whose licensed company you can verify: see safest offshore brokers.
Safest Offshore Forex Brokers 2026
| Broker | Licence | Visit broker | |||
|---|---|---|---|---|---|
 XMFeatured | 4.9/5Editorial rating | FSC Belize | ✓ | 1,000:1 | Visit |
 Vantage | 4.3/5 | FSCA South Africa 51268 | ✓ | Unlimited | Visit |
 Exness | 4.2/5 | FSA Seychelles SD025, CBCS Curaçao, FSC BVI, FSC Belize, F… | ✓ | 2,000:1 | Visit |
 HFM | 4.1/5 | CySEC 183/12, FCA 801701, FSCA 46632, FSA SD015, CMA 155 | ✓ | 2,000:1 | Visit |
 XS.com | 4.1/5 | FSA Seychelles SD089 | ✓ | 2,000:1 | Visit |
 FXGT | 4.1/5 | FSA Seychelles SD019 | ✓ | 5,000:1 | Visit |
 Titan FX | 3.7/5 | Vanuatu FSC | ✓ | 2,000:1 | Visit |
 easyMarkets | 3.7/5 | EF Worldwide Ltd, FSA Seychelles securities dealer | ✓ | 2,000:1 | Visit |
 Axi | 3.5/5 | AxiTrader LLC, registered in St Vincent and the Grenadines | ✗ | 1,000:1 | Visit |
 EBC Financial | 3.5/5 | EBC Financial Group | ✓ | 500:1 | Visit |
 AXIORY | 3.4/5 | FSC Belize 4496214 | ✓ | 2,000:1 | Visit |
 BigBoss | 3.2/5 | Comoros | ✓ | 2,222:1 | Visit |
Related
- How to Spot a Scam Forex Broker: 7 Checks
- Forex Broker Licences Ranked by Tier
- Japan FSA Warnings: What They Mean for Offshore Brokers
- Segregated Funds and Investor Compensation Explained
- Seychelles FSA Licence: How Strong Is It?
- Mauritius FSC Licence Explained
- Vanuatu VFSC Licence Explained
- CySEC Regulation: What It Covers
- Forex Glossary
Frequently asked questions
Will I get my money back if my broker goes bust?
With a UK- or EU-regulated company, probably most or all of it, up to the scheme limits. With an offshore company, it depends on whether client money was really segregated and what the liquidators recover.
How long does it take?
Insolvency processes often take months, and offshore liquidations can take years. Compensation schemes generally pay faster than liquidations.
What happens to my open trades?
They're normally closed at the prices available when the firm stops trading. Their value at that point becomes part of your claim.
Are my bonus and rebate balances included?
Bonus credit isn't your money and won't usually count towards a claim. Rebates owed by a third-party site depend on that site, not the broker.