UK Regulators Probe Three Audit Firms and Three Individual Accountants After £2.6 Billion MFS Mortgage Collapse

What Happened

The UK's Financial Reporting Council announced Thursday it has opened investigations into Berkeley Finch, Magus Chartered Accountants, and Silver Levene UK, along with three unnamed individual accountants, over their work on Market Financial Solutions and connected entities.

MFS, a London-based bridging lender, went into administration in February after creditors forced insolvency proceedings. The company had borrowed approximately £2.6 billion ($3.4 billion) from a string of major financial institutions, according to Insurance Journal.

Specifically: the FRC is investigating Magus Chartered Accountants and two unnamed individual accountants over their work on MFS and related companies. A third unnamed individual accountant faces a separate investigation for conduct in work carried out for MFS.

The Money Trail

The creditor list reads like a who's who of global finance: Barclays, Santander, Wells Fargo, Jefferies, Elliott Management, Castlelake, and Apollo Global Management's Atlas SP unit. These institutions lent to entities controlled by MFS founder Paresh Raja, which in turn funneled money into MFS for short-term real estate lending.

Barclays CEO CS Venkatakrishnan told investors the bank's anticipated losses would be "materially lower" than £500 million, the full amount MFS owes the bank, according to The Guardian. He did not specify a figure.

Allegations Against Raja

Administrators appointed to oversee the insolvency alleged in UK court that Raja used borrowed funds to build a personal property empire and accumulate a cash fortune of at least £408 million. They characterized this as "fraud on a vast scale, backed up by systematic dishonest reporting," according to Insurance Journal's reporting on the court filings.

Creditors further alleged that many of MFS's supposed mortgage borrowers were not genuine third parties but Raja-linked individuals acting on his behalf, and that some properties may have been pledged as collateral to multiple lenders simultaneously, a practice known as double pledging. The Guardian reported both allegations are drawn from court documents.

A £1.3 billion worldwide asset-freezing order was granted against Raja in London and Dubai, barring him from dissipating assets.

Raja disputes the administrators' claims. His lawyer previously told the Daily Telegraph: "Mistakes have been made but there has been no intention to defraud whatsoever and Mr Raja has not been the beneficiary of any shortfall (if any) there may be."

The Audit Angle

The FRC's probe centers on whether MFS's auditors caught, or should have caught, warning signs before the collapse.

Berkeley Finch issued an unqualified opinion on MFS's 2024 financial statements and was paid £72,375 for that audit, according to The Accountant Online. An unqualified opinion means the auditor found no material misstatements. MFS collapsed within months of that sign-off.

Magus Chartered Accountants assisted in preparing MFS's financial statements rather than serving as the standalone auditor. Two Magus-linked individuals, director Khemanand Hurhangee and majority shareholder Dipendra Amin, are themselves among MFS's largest borrowers on paper. Hurhangee has amassed a property portfolio worth more than £200 million on paper, backed by scores of loans arranged by MFS, according to Bloomberg reporting cited by Insurance Journal. Whether those loans were legitimate is among the unanswered questions.

Silver Levene UK audited Zircon Group Ltd., an MFS-linked entity. Silver Levene, acquired last year by Xeinadin, confirmed it will cooperate fully and noted that opening an investigation implies no finding of wrongdoing, per The Accountant Online.

The FRC has not named the three individual accountants under investigation.

Why Small Auditors Matter Here

The structure of Raja's operation meant that different parts of the business were audited by separate small practices rather than through a single consolidated group audit by a large firm. The Accountant Online specifically flagged this point: it prevented any one auditor from seeing the full picture.

That structural fragmentation is itself a question regulators will likely press. Whether the auditors were complicit, negligent, or simply outmaneuvered by a deliberately opaque structure is not yet established. The FRC's investigation is at an early stage.

The Fair Concern

Small audit firms handling complex financial clients face a real capacity problem worth acknowledging. Berkeley Finch was paid £72,375, not a sum that buys forensic-level scrutiny of a £2.6 billion lending operation. Critics of audit regulation argue that the real failure here lies upstream. Regulators and major banks should have demanded Big Four-level consolidated audits for any lender this large, regardless of its corporate structure. Piling responsibility onto underpaid small firms after the fact may be easier than asking why Barclays, Wells Fargo, and Santander did their own due diligence on a lender whose entire audit trail cost less than a London flat.

Auditors who missed or ignored red flags bear responsibility. The FRC's probe landing on small firms while the banks recoup what they can is a dynamic worth watching.

Where This Stands

The UK Financial Conduct Authority opened its own enforcement investigation into MFS in March, making that the first publicly disclosed regulatory action against the firm itself. The FRC's audit probe follows. No charges have been filed and no findings have been made in either investigation.

The unresolved question with real stakes: whether the fragmented audit structure was an accident of MFS's corporate design or a deliberate mechanism to prevent any single firm from seeing the full picture, and whether any of the auditors under investigation had enough visibility to have known.