FCA investigates collapsed lender MFS amid £1.3bn mortgage scandal | Financial sector

Britain’s financial regulator has launched an investigation into mortgage lender Market Financial Solutions (MFS), which collapsed last month amid allegations of fraud.

The move comes after MFS founder Paresh Raja was granted a £1.3 billion global asset freeze order on Wednesday, after creditors successfully obtained court orders in London and Dubai banning the tycoon from distributing his assets.

on friday, Financial Conduct Authority said had “launched an enforcement investigation” into the mortgage lender, which borrowed £1.3bn from a series of finance companies and fell into administration in February.

Companies owned by Raja borrowed money from a range of financial institutions, including banks and hedge funds, before lending the money to MFS, which issued mortgages to customers.

Creditors alleged in court documents that some borrowers who ultimately received mortgages from MFS were actually linked to Raja as part of a structure that “may have been a device designed to extort money under false pretenses.”

There are also concerns that some loans may be unsecured, with claims of collateral being placed on the same property at the same time to two or more financial institutions in a process known as “double lien”.

Financial institutions that appear to be in trouble include banks such as Barclays, Jefferies and Santander, as well as hedge funds and “private lenders” such as Elliott Management, Castlelake and Apollo’s Atlas SP unit.

CS Venkatakrishnan, CEO of Barclays in question It was announced on Wednesday that the bank’s expected losses would be “materially less” than the £500 million MFS owes the bank.

Raja’s spokesman declined to comment. The financier’s lawyer had previously He told the Daily Telegraph: “Mistakes were made but there was no intent to defraud and Mr Raja did not take advantage of any shortcomings (if any).”