Wall Street lenders are scrambling to understand the extent of losses on billions of pounds they lent to a UK-based mortgage provider that collapsed suddenly amid fraud allegations, reigniting fears of poor underwriting standards in the booming market for asset-backed lending.
Firms including Barclays, Jefferies and Apollo’s Atlas SP Partners, its structured credit arm, extended £2bn of financing to Market Financial Solutions. The London-headquartered firm previously lent to a Bangladeshi politician before it collapsed into insolvency on Wednesday amid accusations of double-pledging of its collateral.
Others potentially nursing losses stemming from MFS include TPG, the US private equity firm, and Avenue Capital, the distressed debt specialist, according to two people familiar with the situation.
There might be a shortfall in collateral backing loans to MFS entities of as much as £930mn, according to two people with direct knowledge of the matter.
The incident has triggered a sense of déjà-vu for lenders who are still dealing with the fallout from the dual collapse of US businesses First Brands Group and Tricolor Holdings, both of which also face fraud investigations by the US Department of Justice. The episode has also added weight to JPMorgan Chase chief executive Jamie Dimon’s prophecy that there are more “cockroaches” lurking in credit markets.
The CEO of the world’s largest bank added on Monday that some of his rivals are doing “dumb things” in pursuit of high returns, reminding him of the lead-up to the 2008 financial crisis.
Worries about lenders’ exposure have weighed on their shares since MFS collapsed. Jefferies’ shares were down 10 per cent in New York trading on Friday, while Barclays’ closed down 4.2 per cent in London.
London-based MFS, whose registered address was in a fashionable street in Mayfair, collapsed into administration earlier this week after entities tied to the group filed a court application that cited “real and serious concerns about mismanagement” of the business, “serious irregularities in the management of the key bank accounts” and “a significant shortfall” in collateral that they said could amount to £238mn.
Amber Bridging Limited and Zircon Bridging Limited, the two MFS group entities that filed the application and which have £1bn outstanding, are both in administration. Insolvency practitioners from AlixPartners have been appointed to MFS.
Barclays is among the largest lenders to the group — which claimed it could “deliver loans as large as £50mn, in as little as three days” — with about £600mn of exposure, according to the judge overseeing the case. The British lender also provided banking services to MFS. Barclays froze the group’s accounts prior to it filing for administration, according to people familiar with the situation.
Numerous credit hedge funds are now analysing the company’s finances, anticipating that its lenders will begin dumping its debt at deep discounts as they attempt to claw back any value they can.
Founded by Paresh Raja in 2006, MFS claimed to offer “complex, property-backed lending” made up of short-term bridging loans for real estate investments.
A large part of its business involved backing dozens of property deals linked to Saifuzzaman Chowdhury, a former land minister in Bangladesh. Along with his family members, he built a sprawling $295mn property portfolio from 1992 until August 2024, when the government of Sheikh Hasina in Bangladesh collapsed amid student protests.
The MFS entities first started giving Chowdhury-linked companies loans in mid-2019, just after he took a post in the Dhaka government and he was starting to build a British property empire.
They are listed as being involved in 291 of the 495 charges registered by the companies against properties in England and Wales. Last year, the UK’s National Crime Agency froze 342 properties linked to Chowdhury, worth about £185mn, as part of “an ongoing civil investigation”.
As an active politician when the loans were made, Chowdhury should have been subject to particular scrutiny, especially as his official asset declarations in Bangladesh listed his net worth at only around $2.3mn.
In January 2025, in response to questions as to how Chowdhury passed MFS’s checks, the lender’s lawyers at Harbottle & Lewis told the FT: “MFS has a team that conducts extensive client due diligence and, where necessary, enhanced due diligence on all prospective borrowers.”
MFS financed its business with debt from some of Wall Street’s largest financial institutions, pledging the loans it made to customers as collateral to its own lenders. Banks including Barclays, Jefferies, Santander and Wells Fargo, as well as private credit firms Atlas and Castlelake, all chipped in to provide the family-owned and run mortgage lender billions of pounds.
According to its 2024 accounts, MFS secured £1.3bn in “new institutional funding to support increased lending demand”, on top of £1.1bn it had already received from lenders.
Atlas said that “following a breach of contractual terms by Market Financial Solutions, ATLAS proactively put two warehouses into default last week and is pursuing all legal avenues to maximize recoveries”. The firm has about £400mn of exposure to MFS, accounting for about 1 per cent of its balance sheet.
Raja managed to secure billions of pounds in financing for MFS as its sole director with full control over the business.
“Paresh has oversight of all departments within MFS, ensuring every element of the business is performing to its utmost potential,” a submission for the 2026 Property Awards states.
Some of the entities linked to MFS list Raja’s wife, Prathiba Raja, as a director. The pair are the only two shareholders of MFS.
But in London court proceedings this week the judge overseeing the case raised accusations of fraud, citing creditor allegations that MFS had been double-pledging its assets to lenders who could now have a right to less collateral than they thought.
In a statement made earlier this week, Raja said that it was “an extremely difficult moment for everyone connected with Market Financial Solutions. As a family-founded business that has been built over nearly 20 years, this is not a decision that has been taken lightly.”
“The current situation does not reflect a failure of the underlying business or the quality of our assets,” he added, “but rather a technical and procedural impasse that has temporarily limited our access to everyday banking facilities . . . I remain fully committed to preserving value and doing everything possible to support a positive outcome for all stakeholders”.
The collapse of MFS comes after the unravelling last year of US car parts supplier First Brands — which is accused of double-pledging and faking invoices — and auto lender Tricolor Holdings, sparking concerns over underwriting standards throughout Wall Street.
Jefferies, which has a roughly £100mn exposure to MFS, was stung by losses when First Brands collapsed last year before its founder Patrick James was charged with fraud in January. The bank was one of the car parts supplier’s largest financial backers.
MFS did not respond to an email seeking comment. Raja did not respond to messages sent to him through LinkedIn, or via his lawyers.
A TPG spokesperson said: “TPG’s total exposure is £44mn, which we believe represents less than 2 per cent of MFS’s loan exposures based on publicly reported figures.”
AlixPartners, Avenue, Barclays, Jefferies, Santander and Wells Fargo declined to comment. Castlelake did not respond to a request seeking comment.
The FT was unable to reach Chowdhury for comment.
Last year, responding to questions relating to the FT investigation into Chowdhury, his estate agent said that “funds used by Mr Chowdhury to purchase UK property originated from legitimate businesses in the UAE, US and UK”.
Additional reporting by Simon Foy, Robert Smith and Alexandra Heal in London and Joshua Franklin in New York