London: Paresh Raja, owner of the ₹2,000 crore shadow banking firm Market Financial Solutions (MFS), has been accused of serious fraud and hit with a global asset-freezing order. The bank collapsed last month, following which administrators demanded Raja disclose all assets worth over ₹10 lakh. Additionally, he is restricted from spending more than ₹4 lakh per week without administrators’ consent.
Global Courts Step In as Investigations Deepen
Courts in London and Dubai have approved applications filed by administrators AlixPartners, and the orders have been formally served on Raja. AlixPartners said,
“We welcome the granting of these orders, which follow two weeks of intensive analysis and investigation into MFS and Paresh Raja’s operations. This is an important step in a very complex situation, and the courts’ support is critical to securing the best possible outcome for all creditors.”
MFS was placed under administration last month amid what a judge described as “very serious” fraud allegations. Raja is accused of using a network of fake companies to divert funds from creditors. Creditors claim that some MFS clients, presented as “genuine borrowers,” were in fact closely linked to MFS.
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Allegations of Fake Companies and Linked Borrowers
The allegations focus on eight companies that borrowed from MFS. Creditors successfully placed all eight into administration. Six of the eight are owned by two individuals associated with London-based Magus Chartered Accountancy, which acted as accountants for MFS. No wrongdoing has been alleged against Magus Chartered Accountancy.
According to creditors, lending to connected borrowers and “double-pledging” collateral across multiple loans left a gap of over ₹13,000 crore in MFS’s accounts. Raja’s lawyers have rejected the allegations, stating there was no intent to defraud and that Raja did not personally benefit from any shortfall.
Disputed Claims and Legal Pushback
The collapse of MFS has raised alarm in the shadow banking sector, especially after a series of high-profile failures in the US last year. Shadow banks are private credit providers that operate outside standard banking regulations. MFS did not accept deposits and funded its loans through internal borrowing. Major banks, including Santander, Wells Fargo, Jefferies, and Barclays, had supported MFS prior to its collapse.
Speaking at a Morgan Stanley conference, Barclays CEO CS Venkatakrishnan said, “MFS appears to be a deep and sophisticated fraud. Obviously, I am disappointed that we were involved.” The collapse has not only shocked the City but also prompted an investigation by the Bank of England.
Representatives for Paresh Raja have declined to comment on the asset-freezing order.
