The collapse of British property lender Market Financial Solutions (MFS) is exposing what Bloomberg described as an alleged collateral fraud that may leave lenders facing as much as £1.3 billion in losses and is raising new concerns about due diligence in private credit. 

The fallout has prompted an investigation by UK regulators, MFS founder Paresh Raja has been hit with a global asset freeze, and signs of serious wrongdoing are now beginning to emerge, the news agency said. Administrators and creditors have alleged several forms of misconduct, including diverted loan repayments, properties pledged to multiple lenders, and repeated lending to a small group of “Raja-linked” borrowers who appeared to have modest means despite amassing vast property holdings. 

In one example, a townhouse in London’s Ennismore Gardens appeared to secure two loans arranged on the same day by separate MFS-linked funding vehicles, with the combined debt exceeding the property’s value. Administrators also said 238 million pounds of loan repayments are missing, according to the report. 

The alleged fraud occurred through a sprawling network of companies created by Raja, many of them special-purpose lending vehicles funded by banks and private-credit investors. MFS originated the property loans and acted as servicer, ensuring repayments flowed back to those vehicles, while the funders did not directly choose the underlying deals, Bloomberg said. 

One company, Twinwin Ltd., borrowed about £400 million from an MFS entity backed by lenders including Barclays and Castlelake, and administrators later alleged the company was actually directed by Raja and used as a “vehicle to siphon-off monies,” according to the news agency. Lawyers for the administrators also said some loan agreements appeared to have been fabricated. 

The problems went undetected in part because lenders relied on opaque, self-reported loan portfolios and assumed the collateral backing the loans was sound, Bloomberg said. MFS told investors it had a £2.7 billion loan book and a default rate of just 1.2 percent as of late 2025, far below the industry average, according to internal documents seen by Bloomberg. 

The structure also exploited blind spots in asset-backed private credit, where banks and investors financed complex vehicles but were removed from the underlying assets. Experts cited by Bloomberg said overcollateralization offers little protection if the collateral is duplicated, uncertain, or does not exist as represented. 

Should the fraud allegations prove to be true, “the problem is a due-diligence model that is structurally incapable of detecting fraud in opaque, self-reported loan portfolios,” Patrick Corrigan, a law professor at the University of Notre Dame told the news outlet. “No amount of overcollateralization protects a lender if the collateral doesn’t exist.”

Read more at Bloomberg