Shadow bank boss accused of £1.3bn fraud had been bankrupt

Shadow bank boss accused of £1.3bn fraud had been bankrupt

Tom Saunders

Wed, August 26, 2026 at 6:31 PM GMT+3 3 min read

• MBG.DE +2.14%

The boss of a collapsed British shadow bank accused of £1.3bn fraud had been declared bankrupt shortly before he launched the company, it has emerged.

Paresh Raja, who led mortgage lender Market Financial Solutions (MFS), was made bankrupt over a £350,000 debt just a year before the business started.

He has been accused of "plundering" MFS to fund a lavish lifestyle that included buying "a vast number of cars" such as three Aston Martins, two Mercedes, six Ferraris and three Rolls-Royces.

The collapse of MFS this year triggered shock waves across the City. The lender, an intermediary which used borrowed bank money, had been bankrolled by leading financial institutions including Barclays.

There are now questions about why Mr Raja's bankruptcy was not picked up by the banks before they started lending to him.

Mr Raja, who is thought to reside in Dubai and denies all the allegations, is subject to a £1.3bn global freezing order on his assets.

It emerged on Wednesday that shortly before MFS was founded, the 59-year-old had been made bankrupt by the High Court and banned from launching new companies until 2009.

Despite this, MFS was established a year later in 2006. Pratibha Dewan, Mr Raja's future wife, was listed as the founder of MFS, countering previous assumptions that he had founded the business.

Paresh Dabasia, a creditor to the company, said he had discovered that Mr Raja was previously bankrupt with a simple phone call – raising questions over whether banks had done enough due diligence.

"I picked up the phone to the Insolvency Service and had the details in four minutes. It cost me nothing but as far as I can tell, not one bank lending into this business ever made that call," he told The Times, which first reported the news.

"That is a colossal failure. We call on the Financial Conduct Authority to immediately investigate what went wrong and how it should be put right."

MFS fell into administration in February, triggering allegations that at least £1.3bn has been "misappropriated" from the business.

The company described itself as a specialist provider of buy-to-let mortgage lending and bridging finance.

It was also a shadow bank, which means it funded its loans by borrowing from banks and other lenders.

Mr Raja and his wife allegedly received more than £408m from "funds managed by MFS" into "personal bank accounts" in the UK, Monaco, Singapore and the United Arab Emirates.

The allegations have been made in a lawsuit on behalf of some of the shadow bank's creditors, which include Barclays, Santander, Wells Fargo and Jefferies.

Mr Raja strongly denies the allegations and has consistently maintained that there was no fraud or dishonesty.

As well as lending money to the collapsed shadow bank, Barclays also provided bank accounts to MFS and most of its associated lending vehicles.

Representatives for Mr Raja were contacted for comment. Barclays declined to comment. Lawyers acting for Mr Dabasia were contacted for comment.

Try full access to The Telegraph free today. Unlock their award-winning website and essential news app, plus useful tools and expert guides for your money, health and holidays.