Why So Many Prop Firms Failed in 2024 (And How to Avoid Their Mistakes)

Between mid-2023 and mid-2024, the prop trading industry lost some of its biggest names. My Forex Funds. True Forex Funds. SurgeTrader. MyFundedFX. The Funded Trader.

Each failure followed a different path. One got shut down by federal regulators. Another lost its platform license overnight. A third simply stopped paying traders and hoped nobody would notice.

But every single failure shared a common root: the business was built on foundations that couldn’t hold.

If you’re running a prop firm — or thinking about starting one — these aren’t just cautionary tales. They’re a blueprint of exactly what not to do.

My Forex Funds: The $310 Million Fraud

This is the big one. The case that changed the industry.

What Happened

My Forex Funds (MFF), run by CEO Murtuza Kazmi, collected $310 million in fees from 135,000+ customers between September 2021 and August 2023. That’s an enormous operation by any measure.

In August 2023, the CFTC filed a civil enforcement action in the U.S. District Court for the District of New Jersey. The Ontario Securities Commission (OSC) in Canada simultaneously froze MFF’s Canadian assets.

What They Actually Did Wrong

The CFTC filing laid out the core problem in devastating detail:

MFF was operating as a counterparty to its own traders. When a trader placed a buy order, MFF took the other side. When the trader lost money, MFF profited directly. When the trader made money, MFF lost.

This is fundamentally different from what MFF marketed itself as. Traders thought they were being evaluated for prop trading opportunities. In reality, they were placing bets against their own firm.

Other findings:

• Only about 1 in 5 traders (20%) passed the initial evaluation — and that was considered generous by industry standards.
• MFF operated without any registration as a commodity trading entity.
• The firm collected nearly pure margin on challenge fees, since traders were on simulated accounts.

The Settlement

In January 2025, MFF and Kazmi agreed to a consent order: $1.6 million in restitution plus a $3.4 million civil monetary penalty — roughly $5 million total.

For a firm that collected $310 million, that penalty might seem light. But the real punishment was the shutdown itself. The business was destroyed. The brand was worthless. And the precedent was set for every other prop firm in the industry.

The Lesson

If your firm profits when traders lose, you’re not running a prop firm. You’re running a bookmaker. And if you’re doing it without proper registration, regulators will eventually find you.

This is the single most important lesson from the MFF case: align your incentives with your traders, or get ready for a legal fight you’ll lose. For the full regulatory context, see our country-by-country prop firm regulations guide.

True Forex Funds: Death by Platform Dependency

True Forex Funds didn’t collapse because of fraud or regulatory action. It collapsed because of a single dependency: MetaTrader.

What Happened

In September 2023, MetaQuotes revoked True Forex Funds’ white-label license for MT4/MT5. The firm had no backup plan. When the platform went away, the business went with it.

Traders received no warning. Accounts became inaccessible. Pending payouts vanished. The firm simply ceased to exist.

Why MetaQuotes Pulled the Plug

MetaQuotes had been growing increasingly uncomfortable with prop firms using their platform. Their rationale:

• MetaTrader licenses were designed for regulated brokerages, not challenge-fee businesses.
• Prop firm scams were damaging the MetaTrader brand.
• Regulators were asking MetaQuotes why they enabled unregulated entities.

True Forex Funds wasn’t unique — MetaQuotes revoked licenses from dozens of prop firms throughout late 2023 and 2024. But True Forex Funds was one of the first and most visible casualties.

The Lesson

Never build your entire business on a single platform you don’t control.

This is the most straightforward lesson in the entire prop firm shakeout. When MetaQuotes decided prop firms weren’t welcome, firms that had diversified their technology stack — or built on platforms designed for prop trading — survived. Those that hadn’t, didn’t.

The surviving firms migrated to cTrader, DXtrade, Match-Trader, and TradeLocker. The migration wasn’t painless, but it was possible for firms that had the resources and foresight to act quickly. Our cTrader vs Match-Trader vs TradeLocker comparison details the strengths of each alternative.

For firm operators building on purpose-built prop trading infrastructure like PropFirmsTech, this risk is structurally eliminated. Your platform exists to serve prop firms, not tolerate them.

SurgeTrader: The Quiet Exit

SurgeTrader’s closure was less dramatic than MFF’s but arguably more unsettling for traders who had money on the line.

What Happened

In late 2023, SurgeTrader suddenly ceased operations. The company cited vague “business challenges” without specifics. Traders reported significant difficulties withdrawing their funds.

There was no regulatory action. No platform revocation. SurgeTrader simply… stopped.

What Went Wrong

The full picture never became public, but industry observers noted several factors:

• Cash flow problems — when a prop firm’s revenue depends entirely on new challenge purchases and those purchases slow down, the math breaks fast.
• Payout obligations exceeding revenue — if too many traders pass challenges simultaneously and request payouts, a fee-dependent model can’t cover its obligations.
• Lack of operational reserves — many prop firms operated lean, putting most revenue straight into profit rather than building reserves for payout obligations.

The Lesson

A prop firm that lives on challenge fees dies when challenge fees dry up.

Every prop firm experiences revenue fluctuations. Marketing campaigns perform differently month to month. Seasonal trends affect sign-ups. Competition drives prices down. If your operating expenses and payout obligations exceed your challenge fee revenue for even a few weeks, you’re in trouble.

Sustainable firms maintain significant reserves and diversify revenue streams. They don’t treat every dollar of challenge fee income as profit.

The Funded Trader: A Slow-Motion Collapse

While MFF’s end was sudden and True Forex Funds’ was overnight, The Funded Trader’s demise played out over months in full public view. It was ugly.

What Happened

Starting in early 2024, traders began reporting payout delays from The Funded Trader. Delays stretched from days to weeks to months. The firm’s CEO, Angelo Ciaramello, faced mounting public backlash on social media and trader forums.

Communication from the company was inconsistent at best. Some traders received partial payouts. Others received nothing. The operational chaos was clear.

By mid-2024, the firm had effectively ceased normal operations.

What Went Wrong

The Funded Trader’s failure was operational, not regulatory. Several factors converged:

• Payout infrastructure failure — the firm couldn’t process withdrawals at the scale needed.
• Communication breakdown — instead of being transparent about problems, the company went quiet or gave inconsistent updates, fueling panic.
• Cash management — reports suggested the firm struggled to balance incoming challenge fees against outgoing payouts.
• Trust spiral — once traders started publicly sharing payout failures, new sign-ups dropped, further straining cash flow.

The Lesson

Trust compounds in both directions. Every payout you make on time builds credibility. Every missed payout destroys it exponentially.

The Funded Trader could have survived initial payout delays if it had communicated transparently: “We’re experiencing processing delays, here’s why, here’s our timeline.” Instead, silence and inconsistency turned a manageable problem into a terminal one.

MyFundedFX: Collateral Damage

MyFundedFX was another casualty of the MetaQuotes crackdown in 2024. Like True Forex Funds, it couldn’t survive the loss of its MT4/MT5 platform access.

The firm attempted to migrate to alternative platforms but couldn’t execute the transition successfully. Without MetaTrader, it lacked the infrastructure to continue operations.

The lesson is the same as True Forex Funds: platform dependency kills. But MyFundedFX proved that even firms that tried to migrate could fail if they started too late or lacked the technical resources to pull it off.

The Common Threads

Every failed prop firm shared at least two of these five structural weaknesses:

1. Challenge-Fee Dependency

When 100% of your revenue comes from evaluation fees, you’re one bad quarter away from insolvency. Challenge fees are cyclical — they rise with marketing spend and market excitement, and fall during consolidation periods.

Sustainable firms diversify: subscription fees, premium tools, educational content, or genuine profit-sharing from live trading. For the full unit economics breakdown, see our analysis of prop firm challenge economics.

2. Platform Dependency

Building your entire operation on MetaTrader without a backup plan was a ticking time bomb. MetaQuotes made its position clear, and firms that didn’t listen paid the price.

3. Misaligned Incentives

The MFF model — profiting directly from trader losses — is a regulatory and ethical minefield. Even firms that aren’t technically acting as counterparties face the perception problem: if you only make money when traders fail, are you really a prop firm?

4. Cash Management Failures

Prop firms are cash-intensive businesses. Challenge fees come in. Payouts go out. If you don’t maintain sufficient reserves — typically 3-6 months of payout obligations — you’re gambling that new sign-ups will always cover your liabilities.

5. Communication Failure

When problems arise (and they will), transparency is the difference between survival and death. Traders can tolerate short-term issues. They cannot tolerate being kept in the dark.

How to Avoid These Mistakes

If you’re operating or building a prop firm in 2026, here’s the practical playbook:

Build on Infrastructure You Control

Use platforms designed for prop trading. Not repurposed broker software. Not white-label MetaTrader instances. Purpose-built infrastructure — like PropFirmsTech — that exists specifically to serve your business model.

Diversify Revenue

Challenge fees should be your primary revenue stream, not your only one. Consider:

• Tiered pricing with premium features
• Educational products
• Technology licensing
• Genuine profit-sharing models with live capital

Maintain Reserves

Hold at least 3-6 months of average payout obligations in reserve. This isn’t dead capital — it’s survival insurance. When revenue dips (and it will), reserves buy you time to adjust.

Align Incentives Early

Move toward models where you profit when traders profit. Live capital, real execution, transparent profit splits. Our analysis of the demo vs live funded account shift explains why this transition is accelerating.

Over-Communicate

When something goes wrong — a platform issue, a payout delay, a rule change — tell traders immediately, honestly, and with specific timelines. The cost of transparency is zero. The cost of silence is everything.

Stay Ahead of Regulation

Don’t wait for the CFTC, ESMA, or your local regulator to knock on your door. Engage proactively. Seek legal counsel. Understand what compliance looks like in your jurisdiction and start building toward it.

The Silver Lining

Here’s the counterintuitive truth: the failures of 2023-2024 were good for the industry.

They cleared out undercapitalized operators. They forced surviving firms to professionalize. They gave regulators a reason to create clearer rules. And they taught traders to demand transparency.

The prop trading industry in 2026 is stronger because of the firms that failed. Not despite them.

The firms still standing — FTMO, Topstep, The5ers, FundedNext, Funding Pips — earned their survival. The next wave of firms, built on proper infrastructure and compliant business models, has a chance to build something even more sustainable.

The bar is higher now. That’s exactly where it should be.