FCA launches investigation into collapsed shadow bank MFS

The UK’s financial watchdog has begun a probe into shadow bank Market Financial Solutions following its collapse last month.

The Financial Conduct Authority (FCA) said it had opened an enforcement investigation into the business. The regulator did not disclose the subject or terms of the investigation.

The FCA said MFS is an “Annex 1 business”, which is means it is solely registered with and supervised by the watchdog for its compliance with money laundering, terrorist financing and transfer of funds regulations.

Paresh Raja, who founded MFS in 2006, was hit by a freezing order by courts in London and Dubai earlier this week, ordering him to provide details of his assets and prohibiting the businessman from spending more than £5k a week without consent of MFS’ administrators.

The order was granted upon the request of AlixPartners, which is administering the private lender’s dissolution.

The administrators told the Financial Times: “We welcome the granting of these applications which follow two weeks of intense analysis and investigation into the operations and affairs of MFS and Paresh Raja.

MFS’ collapse on 25 February sent shockwaves through Wall Street, provoking a sell-off of financial firms and asset managers.

JPMorgan Chase boss Jamie Dimon warned in October that the private credit market’s problems stretched beyond a few rogue operators like MFS.

“My antenna goes up when things like this happen. When you see a cockroach, there’s probably more,” he said on an earnings call.

The firm had a loan book of £2.4bn and net assets of £15.9bn at the end of 2024, according to its accounts.

Among the assets connected to MFS are a swathe of companies in control of around 250 super-prime London properties, in high-end locations like Knightsbridge, Belgravia and Mayfair.

One of the property companies which took loans from MFS was linked to a man who recently stood trial for alleged money laundering for a crime syndicate, according to the FT.