Money that once fueled a fast-growing property lender is now tied up in a legal free-for-all. Court filings say Paresh Raja, who owns Market Financial Solutions, is facing as many as six lawsuits as creditors try to claw back roughly £2.3 billion in lending after the company's collapse under allegations of widespread fraud. With overlapping actions flying, Raja has urged creditors to coordinate and consolidate at least some of the cases. His lawyers wrote that "these entities have made no effort whatsoever to coordinate these proceedings," pointing to "a significant degree of internecine warfare" that has left him fielding "increasingly 'urgent' applications."
Several backers, including Barclays and Apollo Global Management's Atlas SP Partners, financed a network of MFS entities. Many of those vehicles are now in administration and looking to litigation for recoveries. Some parties have accused Raja of stripping hundreds of millions from the business and using borrowed funds to bankroll an extravagant lifestyle.
Administrators of Market Financial Solutions International Ltd. served statutory demands on Raja for £278 million, while Interlend Holdings Ltd. wrote to his lawyers earlier this month "demanding immediate payment" of £28 million. Stephen Katz of BTG Begbies Traynor, who oversees the administrations of MFSI and Interlend, said the claims had been confirmed.
One of the MFS entities, London Bridging Ltd., received loan financing from Barclays and from Castlelake LP; Castlelake LP is a firm with majority ownership by Brookfield Asset Management Ltd. LBL alleges Raja "misappropriated" more than £200 million.
Creditor disputes reveal what a business is actually worth in a wind-down. Market Briefs covers distressed situations free every weekday.
Raja has rejected the allegations, saying last month he had not "acted dishonestly or in bad faith at any time." He maintains MFS was preparing for a sale or an IPO until Barclays froze key accounts, which he says set off the collapse. According to legal filings, Raja has asked to pause LBL's case until other related actions are resolved. LBL counters that he is trying to "delay and/or avoid facing" its claims.
His lawyers argue the pileup is wasteful, saying the claimants are advancing "competing, and overlapping and/or inconsistent, claims to what appears to be the same pool of money."
Two other MFS entities, Amber Bridging and Zircon Bridging, have indicated they will file claims against Raja "shortly," according to his legal team. Those entities borrowed more than £1 billion and, according to preliminary estimates, creditors including Apollo's Atlas unit may recover merely 9 to 13 pence per pound. AlixPartners, which is managing the administrations for MFS, Amber and Zircon, had a representative who declined to comment.
For everyday investors, the lesson is that when a funding chain snaps, recoveries can be slow and thin while competing claims jostle for the same pot. Know what your funds actually hold and who gets paid first when things go sideways.
How claims get ranked decides who recovers anything at all. Join Market Briefs free and follow the proceedings.
