Barclays PLC began blocking certain transactions linked to a UK mortgage lender several months ago, before the firm collapsed abruptly last week following fraud allegations. The bank froze all accounts associated with the company in early January.

According to informed sources, after the consecutive failures of US firms Tricolor Holdings and First Brands Group, Barclays and other lenders such as private credit firm Castlelake identified issues with London-based Market Financial Solutions (MFS).

Both US companies are currently under fraud investigation by the US Department of Justice. Their collapses sent shockwaves through the global financial sector last year, prompting lenders to MFS to conduct due diligence on its loan book.

MFS declared bankruptcy last week, reigniting market concerns over lax underwriting standards in the asset-backed lending boom and triggering sell-offs in stocks of lenders including Barclays and Jefferies. JPMorgan Chase CEO Jamie Dimon warned last year that more "problematic companies" could emerge, whose failures might disrupt markets.

Sources indicated that lenders including Barclays detected financial irregularities in their investments related to MFS as early as November 2025. MFS entered administration last Wednesday, accused of double-pledging collateral.

Institutions including Barclays, Jefferies, and Apollo's structured credit unit Atlas SP Partners provided MFS with total financing of £2 billion, secured against transition loans issued by the company. The family-owned firm, headquartered in Mayfair, London, was also involved in a property scandal connected to a Bangladeshi politician.

Last week, entities related to MFS filed court applications expressing "real and serious concerns about mismanagement" and "serious irregularities in the management of core bank accounts," noting a substantial collateral shortfall of up to £238 million, after which MFS entered administration.

A significant portion of MFS's business involved supporting dozens of property transactions linked to former Bangladeshi Land Minister Saifuzzaman Chowdhury. Between 1992 and August 2024, before the collapse of Sheikh Hasina's government due to student protests, Chowdhury and his family amassed a property portfolio worth $295 million.

Media reported last year that 291 out of 495 corporate property charges registered in England and Wales involved entities connected to MFS. The UK National Crime Agency froze 342 properties linked to Chowdhury in June 2025, valued at approximately £185 million, as part of an ongoing civil investigation.

The judge overseeing the case stated that Barclays also provided banking services to MFS, with total exposure to the group amounting to around £600 million. Multiple sources said Barclays began intercepting some of MFS's transactions late in 2025 and froze its accounts in January.

Legal documents show that one month after its accounts were frozen by Barclays, MFS hired law firm Quinn Emanuel in February to sue the bank for "default," but just over a week later, MFS founder Paresh Raja applied to place the company into administration. Quinn Emanuel no longer represents the lender.

Meanwhile, legal filings and sources said Castlelake applied on February 9 to place MFS-linked entity London Bridging Limited into administration, several weeks before the mortgage lender's ultimate collapse.

The sources stated that, concerned about weak underwriting standards, Castlelake began monitoring parts of its portfolio more closely and initially discovered financial anomalies regarding MFS's collateral. They added that the slowness of MFS's responses to requests for additional information surprised the firm.

Castlelake, an asset-backed lending specialist owned by private capital group Brookfield Holdings, had exposure to First Brands through its specialized lending subsidiary Aequum Capital Financial, which prompted it to enhance its due diligence.

The private credit firm stated, "Castlelake participated in the junior portion of a secured mortgage loan portfolio of approximately £400 million managed by MFS. After distribution to other lenders, the firm retained £70 million in secured exposure."

Barclays declined to comment.

Two sources directly familiar with the matter said the collateral shortfall for loans linked to MFS entities could be as high as £930 million.

Currently, more than 25 independent entities related to MFS have entered administration in the UK.