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Barclays began blocking months ago certain transactions linked to a UK-based mortgage provider that collapsed suddenly last week amid fraud allegations, before freezing all accounts tied to the firm in early January.
The bank is among lenders, including private credit firm Castlelake, that identified issues with London-based Market Financial Solutions after the back-to-back failures of US companies Tricolor Holdings and First Brands Group, according to people familiar with the situation.
The collapse of these US companies, which now both face fraud investigations by the US Department of Justice, sent shockwaves through the global financial sector last year and triggered due diligence checks in the loan books of lenders to MFS.
MFS’s collapse last week reignited fears of poor underwriting standards in the booming market for asset-backed lending and prompted a sell-off in the shares of Barclays, as well as of Wall Street lenders including Jefferies. Jamie Dimon, the JPMorgan Chase chief executive, warned last year that there may be more “cockroaches” whose bankruptcies could rattle markets.
Barclays and other lenders first recognised financial irregularities relating to their investments in MFS — which collapsed into insolvency on Wednesday amid accusations of double-pledging of its collateral — in November, according to people familiar with the situation.
Groups including Barclays, Jefferies and Apollo’s Atlas SP Partners, its structured credit arm, extended £2bn of financing to MFS, secured on bridging loans arranged by the family-run and owned Mayfair-based firm that has been linked to a property scandal by a Bangladeshi politician.
Last week MFS sunk into administration 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.
A large part of MFS’s 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.
MFS-linked entities were listed as being involved in 291 of the 495 charges registered by the companies against properties in England and Wales, the FT reported last year. The UK’s National Crime Agency froze 342 properties linked to Chowdhury, worth about £185mn, in June 2025 as part of “an ongoing civil investigation”.
Barclays, which also provided banking services to MFS and has amassed roughly £600mn of exposure to the group, according to the judge overseeing the case, began blocking certain transactions for the lender in late 2025 before freezing its accounts in January, according to multiple people familiar with the matter.
A month after having its accounts frozen by Barclays, MFS hired law firm Quinn Emanuel to sue the bank in February for “breach of contract”, according to legal filings, but just over a week later MFS founder Paresh Raja applied to put the company into administration. Quinn Emanuel is no longer acting for the lender.
Meanwhile, Castlelake made an application to place an MFS-linked entity — London Bridging Limited — into administration on February 9, according to legal filings and people familiar with the matter, also weeks before the mortgage provider eventually collapsed.
Financial irregularities relating to its collateral were first spotted after Castlelake began monitoring some of its portfolio more closely in response to fears of poor underwriting standards, the people said. The firm was struck by how slowly MFS would respond to requests for extra information, they added.
Castlelake, an asset-backed lending specialist majority owned by private capital group Brookfield, had exposure to First Brands through its speciality lending affiliate Aequum Capital Financial. Its exposure to First Brands prompted extra due diligence efforts.
“Castlelake participated in the junior tranche of an approximately £400mn secured mortgage portfolio serviced by MFS. After syndicating out to other lenders, it retains £70mn of secured exposure,” the private credit firm said.
Barclays declined to comment.
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.
More than 25 separate entities tied to MFS have now sunk into a UK form of insolvency.