In August 2023, the Commodity Futures Trading Commission froze the assets of MyForexFunds, a Toronto-based prop trading firm that had collected over $310 million in fees from more than 135,000 customers. The CFTC alleged the firm lied about being a third-party liquidity provider. In reality, MyForexFunds was the counterparty to its customers' trades and used software to worsen prices and close winning accounts.
How the Prop Firm Model Works
Prop firms sell a paid exam. Customers pay a one-time fee — from $50 to a few thousand dollars — for a simulated account. If they hit a profit target of roughly 10% without breaching a drawdown limit, they become 'funded' and get an 80% profit share on real trading. But the odds are stacked against them.
Pass rates are low. FTMO, the market leader, reported that only about 8% of traders pass Phase 1 of its evaluation. Around 7% of all entrants ever collect a payout. A study by FPFX Tech found just 7% of 300,000 accounts succeeded. The Funded Trader saw only 1–2% of all clients make it. Industry composite figures range from 5–10% for futures and roughly 5–7% for all entrants. Most customers fail, and their fees become gross margin for the firm. Payouts to winners come from the pool of fees paid by losers.
The Conflict of Interest: A-Book vs B-Book
After passing, orders on 'funded' accounts often do not go to a real market. Instead, the firm internalizes them — a practice known as B-book. If the trader loses, the firm keeps the losses. In contrast, A-book means orders go to a real venue and the firm earns only spread or commission. Firms decide which traders go to A-book (likely winners) and which to B-book (likely losers). That creates a direct conflict of interest: a firm that B-books a trader has a financial incentive for that trader to lose.
The CFTC case documented the failure mode of B-book abuse. MyForexFunds closed winning accounts on technicalities, the agency alleged. Onchain prop firms now openly state they are the house betting against their own customers — a conflict that was previously hidden.
Industry Revenue and Scale
Despite the risks, the prop firm industry is large and growing. FTMO had $329 million in revenue in 2024 across 2.3 million open accounts. Over ten years, it has paid out more than $450 million. FundedNext, a UAE-based challenger, cleared an estimated $100 million-plus in 2024. The total addressable market for evaluation fees is in the low billions per year.
The model relies on a steady stream of new entrants. Most will fail, but the few who succeed can earn substantial payouts. The conflict arises because the firm decides which traders get a fair shot at the market and which are set up to lose.
What the CFTC Action Means
The CFTC's freeze on MyForexFunds' assets sent a signal, but the broader industry continues to operate with the same built-in conflict. Regulators may need to look closer at how firms classify traders between A-book and B-book, and whether customers understand that their 'funded' account might never see a real exchange. For now, the question remains: how many other prop firms are running the same playbook?
