Keep knowledgeable with free updates
Merely signal as much as the Monetary providers myFT Digest — delivered on to your inbox.
Barclays started blocking months in the past sure transactions linked to a UK-based mortgage supplier that collapsed all of the sudden final week amid fraud allegations, earlier than freezing all accounts tied to the agency in early January.
The financial institution is amongst lenders, together with non-public credit score agency Castlelake, that recognized points with London-based Market Monetary Options after the back-to-back failures of US firms Tricolor Holdings and First Manufacturers Group, in keeping with individuals aware of the scenario.
The collapse of those US firms, which now each face fraud investigations by the US Division of Justice, despatched shockwaves by way of the worldwide monetary sector final yr and triggered due diligence checks within the mortgage books of lenders to MFS.
MFS’s collapse final week reignited fears of poor underwriting requirements within the booming marketplace for asset-backed lending and prompted a sell-off within the shares of Barclays, in addition to of Wall Road lenders together with Jefferies. Jamie Dimon, the JPMorgan Chase chief govt, warned final yr that there could also be extra “cockroaches” whose bankruptcies might rattle markets.
Barclays and different lenders first recognised monetary irregularities regarding their investments in MFS — which collapsed into insolvency on Wednesday amid accusations of double-pledging of its collateral — in November, in keeping with individuals aware of the scenario.
Teams together with Barclays, Jefferies and Apollo’s Atlas SP Companions, its structured credit score arm, prolonged £2bn of financing to MFS, secured on bridging loans organized by the family-run and owned Mayfair-based agency that has been linked to a property scandal by a Bangladeshi politician.
Final week MFS sunk into administration after entities tied to the group filed a courtroom utility that cited “actual and severe considerations about mismanagement” of the enterprise, “severe irregularities within the administration of the important thing financial institution accounts” and “a big shortfall” in collateral that they stated might quantity to £238mn.
A big a part of MFS’s enterprise concerned backing dozens of property offers linked to Saifuzzaman Chowdhury, a former land minister in Bangladesh. Alongside together with his relations, he constructed a sprawling $295mn property portfolio from 1992 till August 2024, when the federal government of Sheikh Hasina in Bangladesh collapsed amid scholar protests.
MFS-linked entities had been listed as being concerned in 291 of the 495 costs registered by the businesses in opposition to properties in England and Wales, the FT reported final yr. The UK’s Nationwide Crime Company froze 342 properties linked to Chowdhury, price about £185mn, in June 2025 as a part of “an ongoing civil investigation”.
Barclays, which additionally supplied banking providers to MFS and has amassed roughly £600mn of publicity to the group, in keeping with the decide overseeing the case, started blocking sure transactions for the lender in late 2025 earlier than freezing its accounts in January, in keeping with a number of individuals aware of the matter.
A month after having its accounts frozen by Barclays, MFS employed legislation agency Quinn Emanuel to sue the financial institution in February for “breach of contract”, in keeping with authorized filings, however simply over per week later MFS founder Paresh Raja utilized to place the corporate into administration. Quinn Emanuel is now not appearing for the lender.
In the meantime, Castlelake made an utility to put an MFS-linked entity — London Bridging Restricted — into administration on February 9, in keeping with authorized filings and folks aware of the matter, additionally weeks earlier than the mortgage supplier finally collapsed.
Monetary irregularities regarding its collateral had been first noticed after Castlelake started monitoring a few of its portfolio extra carefully in response to fears of poor underwriting requirements, the individuals stated. The agency was struck by how slowly MFS would reply to requests for additional data, they added.
Castlelake, an asset-backed lending specialist majority owned by non-public capital group Brookfield, had publicity to First Manufacturers by way of its speciality lending affiliate Aequum Capital Monetary. Its publicity to First Manufacturers prompted additional due diligence efforts.
“Castlelake participated within the junior tranche of an roughly £400mn secured mortgage portfolio serviced by MFS. After syndicating out to different lenders, it retains £70mn of secured publicity,” the non-public credit score agency stated.
Barclays declined to remark.
There could be a shortfall in collateral backing loans to MFS entities of as a lot as £930mn, in keeping with two individuals with direct information of the matter.
Greater than 25 separate entities tied to MFS have now sunk right into a UK type of insolvency.
