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US hedge fund Elliott Management has a roughly £200mn exposure to a UK-based mortgage provider that collapsed last week amid fraud allegations, reigniting fears of poor underwriting standards in the booming asset-backed lending market.
The hedge fund acquired its position from Wrexham-based Chetwood Bank, which is majority owned by Elliott and was among the institutions that helped finance Market Financial Solutions, according to people familiar with the situation.
Elliott joins Barclays, Jefferies and a unit of private capital firm Apollo Global Management, which were among the institutions that extended £2bn to MFS before its collapse. Elliott declined to comment and Chetwood did not respond to a request for comment.
Mayfair-based MFS, which entered insolvency on Wednesday and has been accused by its backers of pledging the same collateral to different lenders without telling them, a practice known as “double pledging” that leaves lenders at risk of a shortfall if their loans are not repaid.
Chetwood originally bought a roughly £200mn stake in a lending facility that had been organised for MFS by another lender, according to a person familiar with the matter. Elliott later acquired the position from the Wrexham-based group at face value, the person said.
Founded by Paresh Raja in 2006, MFS claimed to offer “complex, property-backed lending” made up of short-term bridging loans for real estate investments.
The family-owned and run business also claimed that it could “deliver loans as large as £50mn, in as little as three days”.
MFS financed its lending business with debt from some of Wall Street’s largest financial institutions, pledging the loans it made to customers as collateral to its own lenders.
A large part of its business involved backing dozens of property deals linked to Saifuzzaman Chowdhury, a former land minister in Bangladesh. Along with some of his family members, he built a sprawling $295mn property portfolio from 1992 until August 2024, when the government of Sheikh Hasina in Bangladesh collapsed amid student protests.
Last week MFS sunk into administration after entities tied to the group filed a court application that cited “real and serious concerns about mismanagement” of the business, “serious irregularities in the management of the key bank accounts” and “a significant shortfall” in collateral that they said could amount to £238mn.
Creditors including Barclays and private credit firm Castlelake identified issues with MFS months ago after scrutinising their exposures in the wake of the back-to-back failures of US groups Tricolor Holdings and First Brands Group, according to people familiar with the situation.
The collapse of these US companies, which are now both under investigation for fraud by the US Department of Justice, sent shockwaves through the global financial sector last year.
Barclays, which also provided banking services to MFS and has amassed an exposure of roughly £600mn, according to the judge overseeing the case, began blocking certain transactions for the lender in late 2025.
The bank then froze MFS’s accounts in January, people familiar with the matter said.
Additional reporting by Emma Dunkley
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