A High Court judgment involving Paresh Raja, the founder of Market Financial Solutions (MFS), raised questions about the lender’s conduct just weeks before the specialist mortgage provider entered administration.
In January, the High Court handed down judgment in a case concerning a £20.5m property investment involving Dubai-based businessmen Husainy, Ali and Mohammad Fakhruddin.
The proceedings examined a scheme in which money was extracted from the brothers through invoices and payments linked to UK property projects.
The judgment referenced the involvement of Raja in correspondence relating to invoices used in the transaction.
Mr Justice Marcus Smith said in the ruling that Raja’s response to a draft invoice showed there was “an obvious intention to create deceptive documents to justify illegitimate payments.”
The judge said Raja advised that the invoice should refer to facilitation of an acquisition rather than debt financing.
He concluded that the correspondence indicated Raja knew the invoice had been produced despite “no services actually being provided.”
The ruling also noted that an MFS bank statement showed the lender received £296,400 in May 2016 from Capstan Capital, and that there was evidence before the court that MFS extended loans to defendants involved in the case.
However, the claimants had previously settled claims against Raja and MFS before the judgment was issued, and the court recorded that the terms of those settlements were unknown.
The judge also acknowledged that his findings involved “making findings in respect of states of mind of persons not before the court,” which he said was necessary to determine the claims against other parties.
Just weeks after the judgment was published, MFS entered administration in February amid separate allegations relating to the lender’s loan book and collateral.
The collapse of the bridging and buy-to-let (BTL) lender has since triggered scrutiny of the private credit market and the due diligence undertaken by institutions that funded the business.
Reports have indicated that several global banks and private credit investors had exposure to the lender, while the Bank of England has publically asked banks to review their links to the firm.
The administration also prompted wider questions about governance and oversight within the specialist property lending market, particularly given the scale of MFS’s loan book prior to its collapse.
A representative of Raja commented: “Whilst mistakes may have been made, any allegations of fraud are denied. Mr Raja is fully cooperating to assist creditors.”
The Intermediary has reached out to representatives of MFS for comment.