An offshore fund linked to a controversy involving India’s richest man also lent to the collapsed UK shadow bank Market Financial Solutions (MFS), it has emerged.
MFS, which collapsed this year amid accusations of fraud and a £1.3bn black hole in its accounts, was lent tens of millions by Oyster Bay Fund, which is managed by London investment firm Elara Capital.
Elara Capital was previously linked to claims surrounding Gautam Adani, the Indian billionaire, whose business empire was accused three years ago of “brazen stock manipulation” by a short seller, which he denies.
MFS collapsed into administration in February, prompting allegations that at least £1.3bn had been “misappropriated” from the business. Its founder and chief executive, Paresh Raja, has denied the allegations.
Since MFS imploded, it has been unclear how it turned itself into a property lender which boasted a reported loan book of around £2.5bn, raising money from some of the City’s most important institutions.
The shadow bank, which provided buy-to-let mortgages and bridging finance, had funded its loans by borrowing from lenders including Barclays, Santander, Wells Fargo and Jefferies.
Yet in 2020, well before it secured hundreds of millions of pounds from major lenders, Oyster Bay lent to MFS through Mrida Solutions, an intermediary vehicle whose sole director was Mr Raja.
Accounts show that Oyster Bay’s exposure to Mrida peaked at £16.5m in 2022 and stood at £14.8m in its last filed accounts. In turn, Mrida lent that money to at least one part of MFS.
At the same time, Oyster Bay was also lending to companies tied to Mr Adani, court filings reveal.
Court records show that the fund had made a series of bets on India’s Adani Group. These were funded by borrowing from Nomura, the Japanese bank, which is now in a dispute with Oyster Bay.
These bets unravelled after Hindenburg Research, a short-selling firm, claimed in a 2023 report that a number of funds, including some managed by Elara Capital, were fronts for Adani, investing exclusively in shares in his companies to manipulate their stock prices.
The collapse of the bets prompted the dispute between Oyster Bay and Nomura, where the accusations from the controversial report reemerged.
Lawyers for Nomura cited the report in legal filings claiming that some of Elara Capital’s other funds “appeared to be supported by the Adani Group”.
Oyster Bay was not among the funds originally named in Hindenburg’s report.
Mr Adani has rejected the allegations by Hindenburg as “baseless” and “nothing short of a calculated securities fraud”.
In a 413-page rebuttal to Hindenburg’s allegations, he described “innuendos” about the Elara funds as “incorrect”.
Mrida is listed as a creditor to at least two MFS entities, one of which provided debt in a £300m funding deal with Barclays. Barclays declined to comment.
Oyster Bay’s dispute with Nomura centres on allegations that, following the Hindenburg report, senior bankers had become “concerned about its exposure to Adani”.
It alleges that Nomura breached a deal to keep the fund’s bets open, selling the underlying Adani shares at a significant loss for Oyster Bay.
A Nomura spokesman said: “Nomura disagrees with Oyster Bay’s claim and will vigorously defend it.” Elara Capital did not respond to requests for comment.
In September last year, India’s capital markets regulator ruled that the evidence relating to the Adani Group was insufficient to support fraud claims.
A spokesman for Mr Raja declined to comment.
