Morgan Stanley backed MFS before UK private credit group's collapse

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Morgan Stanley backed MFS

Highlights

Morgan Stanley bought £50 million of Class A loan notes from Earthave Bridging in November 2021, establishing an early financing link to MFS.
MFS collapses in February owing £1.8 billion ($2.4 billion) to creditors, with court filings alleging fund misappropriation by founder Paresh Raja, who reportedly fled to Dubai.
Wells Fargo invests £142 million in October 2023, as filings reveal major banks provided hundreds of millions to MFS in 2023–2025 before investigations by the FCA and FRC began.

Early financing link emerges from 2021 filings

As first reported by Reuters, loan documents filed with UK Companies House show Morgan Stanley bought £50 million of Class A loan notes from Earthave Bridging in November 2021, giving early backing to a business controlled by MFS founder Paresh Raja.

Earthave used the proceeds to buy MFS mortgages and later repaid investors, according to its 2021 and 2024 accounts reviewed in the report. Morgan Stanley declines to comment, while filings reviewed show the loan is repaid with interest.

The transaction marks the first publicly documented link between Raja, MFS and Wall Street. It comes as institutions ranging from insurers to smaller public pension funds rush into private credit, a market that grows rapidly as tighter post-crisis banking rules curb risk-taking by major lenders.

Collapse raises wider concerns for private credit exposure

MFS collapses in February owing £1.8 billion, or $2.4 billion, to creditors, according to administrators AlixPartners. Court filings reviewed in the report show some creditors accuse Raja of misappropriating company funds, and a judge says in a March ruling that he appears to have fled to Dubai.

Reuters says Raja struck funding deals with domestic and regional banks from at least 2015 through a network of 78 companies he controls. Later financing involves major banks including HSBC, Barclays and Wells Fargo, with insolvency filings showing Raja-controlled companies raise hundreds of millions of pounds for MFS in 2025, including a £142 million Wells Fargo investment in October last year.

Britain's chief insolvency judge says in a late February ruling there are serious and unresolved questions about MFS management and governance, adding that multiple large financial institutions become creditors. The Financial Conduct Authority opens an investigation in March, and the Financial Reporting Council announces on June 11 a separate probe into a group of auditors involved with MFS and related companies.

The FCA’s proposed settlement with the so-called “Essex Boys” oil traders outlined how the regulator seeks to address suspected coordination and information-sharing during the 2020 oil market crash. Our earlier article noted the deal would include a £1mn charity donation, annual competition-law training, and commitments not to share sensitive trading information, while stopping short of any admission of wrongdoing.

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