High Court claim alleges Barclays has not returned cash owed following high-profile collapse of mortgage lender MFS
The administrators of collapsed mortgage lender Market Financial Solutions (MFS) are launching legal action against Barclays, alleging it refused to let them access the company’s bank accounts to reclaim millions of pounds.
Alix Partners filed a High Court claim against the banking giant on Friday, accusing Barclays of not returning cash owed and seeking a court order to grant access to frozen MFS accounts.
Barclays held about £160 million worth of accounts tied to MFS and various related entities when the lender collapsed earlier this year, with MFS accused of simultaneously using the same property assets to secure loans from different banks.
Creditors attempting to recoup assets from MFS are reportedly facing a total shortfall of about £1.3 billion. Barclays, which has said it will defend the claim, first started freezing MFS accounts in November of last year after identifying irregularities. In April, it released £21 million to Grant Thornton following a claim.
People familiar with the matter say the bank believes it is entitled to use frozen funds to offset other losses, the Financial Times reported. Barclays’ exposure to MFS reportedly totalled about £500 million, and it acted as corporate bank to the company as well as a lender.
Barclays said it was curbing some lending in April after taking a £228 million hit linked to the MFS collapse. The Financial Conduct Authority (FCA) launched an investigation into MFS in March, and the High Court sanctioned the sale of some of MFS founder Paresh Raja’s supercar collection to recoup funds.
Raja, against whom a worldwide asset-freezing order was granted in March, has denied allegations of fraud and dishonesty in the MFS collapse.
MFS raised funding from private investors and institutional backers in London and New York. Elliott Management, a prominent US hedge fund, was reportedly among the institutions with significant exposure to the lender.
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